SINGAPORE (Reuters) - An Iranian rocket attack on U.S. forces based in Iraq has sent markets into turmoil and investors racing for safety. Here are analyst views on the market moves:
“The weight of money is counting on a replay of the price-action on Monday. Essentially people are betting that this is not going to be our main focus three months from now.”
DAVID KOTOK, CHIEF INVESTMENT OFFICER, CUMBERLAND ADVISORS, FLORIDA
“The market looks at...single events and doesn’t say it is a sequence intensifying to larger scale war. It is pricing in tension and risk but not the development of larger scale war.”
JAMES MCGLEW, EXECUTIVE DIRECTOR OF CORPORATE STOCKBROKING, ARGONAUT, PERTH
“We are getting exaggerated moves but that’s of course volatility playing. Markets simply hate uncertainty. It’s an old adage but it definitely holds true in the current situation - markets can price risks but they can’t price uncertainty.
“I don’t think it’s going to be a bloodbath in the equities market but this volatility certainly takes the wind out of the sails.”
CLIFF TAN, EAST ASIAN HEAD OF GLOBAL MARKETS RESEARCH, MUFG, HONG KONG
“I think the market yesterday was very short-sighted. I don’t know any serious analyst who’s looked at Iran for a while who didn’t expect any kind of retaliation. Unfortunately, I’m not sure if this round (of retaliation) will be the last round.”
“Expect equities to take a hit, especially in imported energy-dependent Asia. Airline stocks will be out of favour today because of oil, but that won’t be the whole story.
“The potential closure of the Straits of Hormuz - Iran has plenty of land-based anti-ship missiles - will severely disrupt oil supplies from the Middle East. We may also see next week’s signing of the interim U.S.-China trade agreement in Washington DC delayed.”
KAY VAN-PETERSEN, GLOBAL MACRO STRATEGIST, SAXO CAPITAL MARKETS, SINGAPORE
“That’s the key risk, that they maybe kill Americans, and the U.S. strikes Iran and then they do something else that again is kind of direct. But I don’t think it takes us to a market rout. It makes it a little bit tougher to play the bounce, but it’s still going to be the same old move at the end of the day.
“I guess the biggest risk is actually just something else entering...I just think for proper risk-off, you’re going to need a lot more at the end of the day.”
“If it stays more controlled (confined to the Middle East), the market will motor through this.
“If it escalates, it is a different game. What is really haunting me is - will investors who are pushing the FANG stocks use this as an excuse to sell and then equities fall into a 3-5 percent pullback?”
CHRISTOPHER STANTON, CHIEF INVESTMENT OFFICER, SUNRISE CAPITAL, SAN DIEGO
“Things have become increasingly overbought. If you’re an investor, don’t you want to take it easy here and back off a bit?
(Further escalation could) give you a big, double-digit drop that just scares the living daylights out of folks”.
ANTHONY CHAN, CHIEF ASIA INVESTMENT STRATEGIST, UNION BANCAIRE PRIVEE, HONG KONG
“The market is basically waiting to see if this is it, or if there will be more retaliation from Iran.
“Investors hate uncertainty. If there really is a war the outlook would actually be clearer. At the moment, the uncertainty is overshadowing performance.”
MASAYUKI KICHIKAWA, CHIEF MACRO STRATEGIST, SUMITOMO MITSUI ASSET MANAGEMENT CO, TOKYO
“Trump is doing this for the U.S. presidential election but seems to have made some miscalculations. Iran also miscalculated its response when paramilitary forces linked to Iran surrounded the U.S. embassy. Iran is already in bad shape because of U.S. economic sanctions and does not have the military capability to defeat the United States in a direct war.
“Both sides have incentives to control this situation after a few rounds of retaliation, but this depends on how much damage there is to Iraqi oil production capacity, what happens between Iran and Israel and the scale of human casualties. Hopefully in two to three weeks there could be some efforts from both sides to at least contain the situation.”
“In the short term, the market will shrug it off. However it will be closely monitoring any further developments. Any future actions by either side will be taken much more seriously.”
ASHLEY GLOVER, HEAD OF SALES TRADING FOR APAC AND CANADA, CMC MARKETS, SYDNEY
“What we are seeing at the moment is a big risk off move.
“We are looking out for whether the U.S. is going to retaliate so it’s going to be a big wait-and-see mode until we hear from Trump. And as a result, U.S. futures are off the lows now. We are seeing that ‘buy the dip’ mentality creeping in as big long-term investors like to buy into these weaknesses.”
“It’s getting really serious...but there is a feeling of achievement in terms of technical charts as Brent has surged to above $70/barrel and near a high in September, 2019 after attacks on Saudi Arabian oil sites.
“We have to see how much and what damage the latest attacks have caused, but oil markets may come down, just like last September, if we can confirm that oil facilities have not been affected and as both U.S. and Iran don’t want a war.”
ROB CARNELL, ASIA-PACIFIC CHIEF ECONOMIST, ING, SINGAPORE
“It’s a very classic risk off, and I guess the question is how far do you push it, and I’d say keep going.
“This is the Iranian response to the killing of Soleimani. We now have to see what the U.S. response to the Iranian response is. This looks as if it could escalate. From a market perspective I think this one could run and run.”
RAY ATTRILL, HEAD OF FX STRATEGY, NATIONAL AUSTRALIA BANK, SYDNEY
“The threat of retaliation the market was worried about last week looks to have become real so there is no other way for markets to go really other than to go to safe havens.
“The presumption was that U.S. President Donald Trump wouldn’t want to start a war this side of election but that presumption would potentially be tested.”
“The bigger picture will be how the U.S. responds and whether it all escalates. It’s too early to tell so some smallish early selling to reduce risk would be my assessment.”
MIKE O’ROURKE, CHIEF MARKET STRATEGIST, JONES TRADING
“It is important to note that President Trump was very clear that the U.S. would deliver a heavy handed response to any Iranian retaliation. Thus, futures should not only be reacting to the Iranian attack, but also to the clear escalation that will be the impending U.S. escalation.”
“You can pretty much get the sentiment from gold. It is holding above $1,600. If there is confirmation that there are U.S. casualties, it could go higher.
“If it does look like we’ve got U.S. casualties, then I don’t think Trump is going to just stand back and take that...World War III has been thrown around. I don’t think we’re there yet. But it does look like Iraq II.”
Reporting by Tom Westbrook in Singapore, Swati Pandey in Sydney, Scott Murdoch and Noah Sin in Hong Kong, Stanley White and Yuka Obayashi in Tokyo, Megan Davies, Ira Losebashvili and Rodrigo Campos in New York; Editing by Jacqueline Wong