INSUBCONTINENT EXCLUSIVE:
SHANGHAI: Asian shares and US treasury yields tumbled on Wednesday, while the yen, gold and oil shot higher after Iran fired rockets at
Iraqi airbases hosting US military forces, stoking fears of a wider conflict in the Middle East.
Iran's missile attacks on the Ain Al-Asad
air base and another in Erbil, Iraq, early Wednesday came hours after the funeral of an Iranian commander whose killing in a US drone strike
has intensified tensions in the region.
MSCI's broadest index of Asia-Pacific shares outside Japan was 1 per cent lower shortly after
China's share markets began trading, with China's blue-chip CSI300 index down 0.56 per cent.
Japan's Nikkei tumbled 2.2 per cent and
Australian shares fell more than 1 per cent
US stock futures were also sharply lower, with S-P500 e-minis off nearly 1 per cent.
"It's a very classic risk off," said Rob Carnell,
Asia-Pacific chief economist at ING in Singapore.
"This is the Iranian response to the killing of Soleimani
We now have to see what the US response to the Iranian response is
This looks as if it could escalate," he said.
"If you see US treasuries rallying a bit this morning, expect them to rally quite a bit
further should there be a forceful response from the United States, which I'd imagine there would befrom a market perspective I think this
one could run and run."
The yield on benchmark 10-year US Treasury notes last stood at 1.7534 per cent, down more than 7 basis points from a
US close of 1.825 per cent on Tuesday, though up from session lows
US 10-year Treasury futures had earlier peaked at their highest level since November, and were last up 0.63 per cent.
The two-year yield
dropped to 1.4982 per cent compared with a US close of 1.546 per cent.
The dollar slipped against the yen, with the Japanese currency
touching its strongest point against the greenback since October
The US currency was last down 0.28 per cent against the yen at 108.11.
The euro was relatively unmoved on the day, rising 0.04 per cent to
The dollar index, which measures the greenback against six major peers, was 0.19 per cent lower at 96.819.
In commodity markets, global
benchmark Brent crude futures shot back above $70 per dollar to their highest level since mid-September, and were last up 3.59 per cent at
US crude soared 3.46 per cent to $64.87 a barrel.
The flight to safety and a falling dollar supported gold, which rocketed 1.80 per cent on
the spot market to $1,602.39 per ounce.
"You can pretty much get the sentiment from gold
It is holding above $1,600, if there is confirmation that there are US casualties, it could go higher," said Matt Simpson, a senior market
analyst at Gain Capital in Singapore.
"If it does look like we've got US casualties, then I don't think Trump is going to just stand back
"World War III has been thrown around
I don't think we're there yet
But it does look like Iraq II."
Reports of the attack threw the market off balance after better-than-expected data in the US
non-manufacturing sector helped to lift the dollar overnight
Markets in Asia had bounced on Tuesday amid easing anxiety over the possibility for further escalation in the Middle East