News Column

Asia stocks rebound as Iraq fears wane

August 12, 2014

Asian markets rose on Monday following widespread falls last week as investors took heart from Wall Street shrugging off fears over instability in Iraq and Ukraine.

Tokyo rebounded 2.38 per cent, closing up 352.15 points at 15,130.52 and making up much of the 2.98 per cent dip it suffered on Friday after US President Barack Obama's announcement that he had authorised air strikes in Iraq.

Other regional markets saw more modest gains. Sydney rose 0.40 per cent, or 21.7 points to 5457.0 while Seoul was up 0.41 per cent, or 8.27 points, to close at 2,039.37.

In afternoon trade Hong Kong was 1.24 per cent higher while Shanghai was up 1.19 per cent.

The dollar also rallied against the yen and euro after the unit plunged last week as investors snapped up the Japanese currency, seen as a safe haven in times of uncertainty and turmoil.

Last week ended on a sour note for most Asian markets as worried investors took fright from a ramping up of instability in Iraq, where the US has been launching air strikes against extremist militants besieging ethnic minorities in the country's north.

But US markets shrugged off the escalation of violence, ending the week in the black with a big rally on Friday.

The Dow Jones Industrial Average rose 0.37 per cent, or 60.56 points to 16,553.93 by close of play while the tech-rich Nasdaq Composite Index added 0.42 per cent, or 18.26 points to 4,370.90.

Analysts said Asian markets were still keeping a close eye on the global geopolitical situation, but added that investors were beginning to feel both the Ukraine and Iraq conflicts were de-escalating.

"On an interim-term view, geopolitics remain at the forefront of investors' decision making," wrote Evan Lucas at Melbourne-based IG Ltd in a note. "The conclusions from the weekend are that conflicts are cooling, and the risk-off events of the past two weeks may see upside risk as de-escalation spreads across the conflicts."

But risks remain. Over the weekend Ukraine's army shelled the main rebel bastion of Donetsk as Russia called for a humanitarian ceasefire which the West warned could be a pretext by Moscow to send in troops.

This week investors will be looking for economic health indicators from China. The world's second largest economy is due to release its latest industrial output, retail sales and fixed-asset investment figures on Wednesday.

US retail sales and industrial production for July will also be released later this week.

In forex trade the dollar strengthened to 102.13 yen in Tokyo afternoon trade, against 102.06 yen in New York late Friday and 101.81 yen in Asia.

The euro was quoted at $1.3401 and 136.87 yen, slipping from $1.3416 and 136.93 yen in New York.

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Source: Khaleej Times (United Arab Emirates)

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