Stocks Pare Losses Spurred by Iran Strike; Oil Up: Markets Wrap

(Bloomberg) — U.S. stock futures and Asian equities pared earlier declines as investors mulled an Iranian attack on military facilities in Iraq hosting American troops, escalating tensions in the Middle East. Haven assets pared gains.

The strike had sent S&P 500 Index futures as much as 1.7% lower, though moves eased after Iran said it had “concluded proportionate measures” and wasn’t seeking war. President Donald Trump said he’ll make a statement Wednesday morning. Benchmark U.S. Treasury yields came off their session lows and yen erased gains.

Iran had fired several rockets at two joint U.S.-Iraqi bases early Wednesday morning in retaliation for the killing of a top Iranian military leader. Gold retraced much of its move higher along with oil, which at one point surged above $65 a barrel.

“Markets will likely remain nervous,” Mitul Kotecha, a strategist at TD Securities, said. “Much now depends on the U.S. reaction and whether there is further escalation.”

Caution is returning to markets after a bumper 2019 for a range of asset classes amid signs hostilities are moving on to the next stage following the airstrike that killed General Qassem Soleimani last week. Investors have been left scrambling to reassess the risks posed by the U.S.-Iran conflict.

Meantime, investors continue to weigh developments on the trade front with the first phase of the U.S.-China trade deal expected by many to be signed on Jan. 15.

Read here for more on the ongoing market impact:

• On Second Thought, Markets Look at U.S.-Iran Risk More Seriously
• Global Market Reaction to Iran Rocket Attack in Four Charts
• Gold Surges Above $1,600 as Iran Attacks Spark Flight to Havens
• Markets Rush to Reassess U.S.-Iran Risk After Downplaying Danger

Here are some events to watch for this week:

• Federal Reserve officials Richard Clarida, John Williams (NYSE:), James Bullard and Charles Evans speak on Thursday.
• The U.S. monthly employment report is due Friday.

These are moves in major markets:

Stocks

• Futures on the S&P 500 Index declined 0.4% as of 11:40 a.m. in Tokyo. The underlying gauge fell 0.3% on Tuesday.
• Japan’s index lost 2%.
• Hong Kong’s retreated 0.9%.
• The dipped 0.7%.
• Australia’s S&P/ASX 200 Index was down 0.3%.
• South Korea’s Kospi index fell 1%.
• MSCI Asia Pacific Index dropped 0.9%.

Currencies

• The yen rose 0.1% to 108.41 per dollar.
• The traded at 6.9478 per dollar, down 0.1%.
• The Bloomberg Dollar Spot Index dipped 0.1%.
• The euro bought $1.1155, up 0.1%.

Bonds

• The yield on 10-year Treasuries declined about six basis points to 1.76%.
• Australia’s 10-year yield fell about six basis points to 1.16%.

Commodities

• West Texas Intermediate crude jumped 2% to $63.92 a barrel.
• Gold rose 0.9% to $1,589.28 an ounce.

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