Asian markets slump on Mideast crisis weak growth outlook

HONG KONG (AFP) - Asian markets recovered ground on Tuesday with traders weighed down by unpredictability over the ongoing crisis in the Middle East and key earnings and economic data releases expected later in the week.

Volatile US Treasury yields had affected Monday trading on Wall Street where some indexes rebounded after a sluggish start but the S&P 500 suffered its lowest close since May. 

That uncertainty transferred to the Asian trading day with both Hong Kong and Tokyo trading down before the Nikkei 225 staged a late recovery at the close while the Hang Seng Index continued slumping. The rising bond yield has increased worries that Federal Reserve interest rates will stay higher for longer, denting the growth outlook.

"The rise of the 10-year US bond yield and worries that the Middle East situation may deteriorate continued to weigh on the Tokyo market," Nomura Securities said. As shares fell for the better part of the day, traders began cashing in on bargains in the final trading hours. Seoul, Taipei, Jakarta, Singapore and Sydney also found themselves in positive territory.

But these concerns, as well as an upcoming report on third-quarter US growth and September personal income and spending that includes key inflation data, hampered positive moves in Hong Kong. "The current economic environment presents a confusing backdrop, making it incredibly challenging to make a definitive equity market trading assessment," said Stephen Innes of SPI Asset Management.

"Geopolitical concerns and a weaker growth outlook are seemingly weighing more heavily on equities." The yield on the 10-year US Treasury note had topped five percent for the first time in 16 years on Monday but moved lower later in the day.

But Shanghai traded higher throughout the day to recover from its worst start to the week in months on Monday after China's sovereign wealth fund purchased exchange-traded funds to boost the country's diving stock markets. "Authorities are making it a rule to step on the brakes whenever there looks like there's overwhelming downward momentum," Raymond Chen, fund manager at Zizhou Investment Asset Management, told Bloomberg.

"This does help somewhat ease the panic, assuring investors that the nation will continue offering support if it drops further." Meanwhile, Europe's major bourses opened largely flat, with London starting just off while Paris and Frankfurt nudged into the green.

The war in Gaza had also hammered oil prices on Monday after major gains last week and crude was once again higher in Asian trade. "Geopolitical risks have led to divergent movements in commodity markets," Innes said.

"While geopolitical tensions have contributed to a rising geopolitical risk premium for oil, no physical oil supply disruptions have occurred, taking some of the heat out of the rally." While markets see-sawed, Bitcoin crossed 35,000 for the first time since May last year. Innes said the surge was caused by "growing exhilaration among investors regarding the potential approval of a bitcoin exchange-traded fund".