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Asian stocks mixed, oil prices up after Iran general killed

AFP/Hong Kong
Filed on January 3, 2020 | Last updated on January 3, 2020 at 09.26 am
Oil prices soar, Qasem Soleimani, Iran

Qasem Soleimani was hit in an attack on Baghdad international airport.

Asian stocks were mixed Friday and oil prices surged after an Iranian general was killed by US forces in Iraq.

Benchmarks in Shanghai and Hong Kong declined. Australia and some Southeast Asian markets advanced. Japanese markets were closed.

News that Gen. Qassem Soleimani, head of Iran's elite Quds Force, was killed in an air attack at the Baghdad international airport prompted expectations of Iranian retaliation against U.S. and Israeli targets.

"A big fat dollop of geopolitical uncertainty has landed on investors desks," said Jeffrey Halley of Oanda in a report.

Overnight, Wall Street rose to new records, boosted by technology stocks.

Investors were encouraged by expectations of stronger global economic growth in 2020 and the planned signing of an interim US-Chinese trade agreement.

The Shanghai Composite Index shed 0.3% to 3,076.73 and Hong Kong's Hang Seng lost 0.2% to 28,482.88. Taiwan and Singapore also declined.

Seoul's Kospi was off less than 0.1% at 2,173.20 and Sydney's S&P-ASX 200 gained 0.7% to 6,739.80. India's Sensex opened down 0.3% at 41,505.83.

Markets in Malaysia and Indonesia, both oil producers, gained.

There was no immediate indication how Iran would respond to Soleimani's death, but Tehran has seized oil tankers and shot down a U.S. military drone.

On Wall Street, the benchmark S&P 500 index climbed 0.8% to 3,257.85. The Dow Jones Industrial Average rose 1.2% to 28,868.80. The Nasdaq composite gained 1.3% to 9,092.19.

Walt Disney, Boeing, Apple and other big companies rose. Technology sector stocks accounted for a good part of the upward move. Smaller-company stocks lagged the broader market's gains.

The S&P 500 and Nasdaq closed out the year Tuesday with their best annual performance since 2013.

Investors are waiting for Washington and Beijing to formalize a trade deal that has helped ease market jitters over the 18-month-old dispute between the world's two biggest economies.

Washington and Beijing announced a "Phase 1" pact that calls for the US to reduce tariffs and China to buy larger quantities of US farm products.

This week, President Donald Trump tweeted that he will sign the initial trade deal with China at the White House this month.

In currency markets, the dollar declined to 108.09 yen from Thursday's 108.56 yen. The euro edged down to $1.1168 from $1.1171.

Oil surge

While equity markets turned lower, oil prices surged on news of Soleimani's death, with global benchmark Brent crude shooting 3.02% higher to $68.25 per barrel and U.S. West Texas Intermediate crude jumping 2.75% to $62.86 per barrel.

News of the strikes came after U.S. Defense Secretary Mark Esper said on Thursday there were indications Iran or forces it backs may be planning additional attacks after Iranian-backed demonstrators hurled rocks at the U.S. embassy in Baghdad following American strikes on Sunday against bases of the Tehran-backed Kataib Hezbollah group.

Esper warned that the "game has changed" and it was possible the United States might have to take preemptive action to protect American lives.

In currency markets, the dollar weakened as investors snapped up safe-haven yen. The greenback fell 0.52% against the Japanese currency to 108.00.

The dollar was flat against the euro at $1.1170.

The dollar index, which tracks the dollar against a basket of six major rivals, was down 0.09 per cent at 96.758.

The US strikes in Iraq and a weaker dollar combined to burnish the value of gold, driving the precious metal 0.75% higher on the spot market to $1,540.25 per ounce, around four-month highs.

Gold prices hit four-month high

Gold prices climbed to a four-month high on Friday, as tensions mounted in the Middle East after a senior Iranian military official was killed in a US air strike, while a weaker dollar also provided some support to the metal.

News from the Middle East along with some technical buying and a weaker dollar is supporting gold prices today," said Benjamin Lu, analyst at Phillip Futures.

Spot gold hit its highest since Sept. 5 at $1,540.48 and was up 0.6 per cent at $1,538.42 per ounce by 0250 GMT. US gold futures gained 0.9 per cent to $1,541.20 per ounce.  For the week, spot gold has gained 1.9 per cent, heading for a fourth consecutive weekly increase.


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