Most Asia stock markets trim early gains as Mideast airstrikes hit sentiment

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(Reuters) – Most Southeast Asian stock markets trimmed early gains on Friday as mounting Middle Eastern tensions dented sentiment, while the Philippine index closed 1.3% firmer after investors picked up beaten-down stocks.
Risk appetite across global markets faltered after U.S. airstrikes at Baghdad airport killed Iranian Major-General Qassem Soleimani, heightening geopolitical tensions.

Most regional markets pulled back from session highs yet ended in the black, with most of them posting solid weekly
gains, as a steady growth in China’s production activity and its central bank announcing a cut in banks’ reserve ratio supported the mood.

Against the backdrop of a thaw in trade tensions between the United States and China, global markets had seen renewed
appetite for risk assets.

“Investors appear to bet that the initial caution will pass, preferring to focus on the broader global recovery story,” said
Jeffrey Halley, senior market analyst, Asia Pacific at OANDA.

The Philippine index on Friday rebounded from previous session’s sharp decline to close at its highest in more
than a week, underpinned by industrial and consumer stocks. The index gained 0.3% for the week.

“The PSE has managed to bounce from yesterday mainly on bargain hunting after the first day slump,” said Nicholas
Antonio Mapa, senior economist at ING.

Universal Robina Corp and JG Summit Holdings Inc were the top percentage gainers in the benchmark index.

Thai shares closed flat after rising to their highest in more than five weeks.

Losses in industrial and healthcare stocks offset gains in energy shares that had rallied earlier in the day after the U.S.
airstrike stoked concerns about oil supply disruptions.

Airports of Thailand Pcl fell as much as 2% following brokerage Jefferies’ note that said it expected the
company’s domestic passengers growth to remain in a downward trend in 2020.

The Singapore index was dragged lower by financials, but the benchmark posted weekly gains of 0.3%.

DBS Group Holdings and Oversea-Chinese Banking Corp Ltd slid about 1% each after China’s Ant Financial, an affiliate of Alibaba Group Holdings, said it had joined the race for a digital banking licence in the city-state.
Malaysian equities ended 0.5% higher, lifted by healthcare and basic materials stocks, with the benchmark posting weekly gains of 0.1%.

Data showed that Malaysia’s exports dropped for the fourth straight month in November, contracting 5.5% from a year earlier, though slower than the 6.7% fall recorded in October.

Canada stocks-TSX futures fall

Canada’s main stock index futures dropped on Friday amid tensions in the Middle East after the United States killed Iranian Major-General Qassem Soleimani.

Iran threatened to hit back hard after a U.S. air strike in Baghdad killed Soleimani, commander of Iran’s elite Quds Force and architect of its growing military influence in the Middle East.

March futures on the S&P/TSX index were down 0.84% at 7:00 a.m. ET.

The Toronto Stock Exchange’s TSX closed up 0.21% at 17,099.95 on Thursday.

Dow Jones Industrial Average e-mini futures were down 1.21% at 7:05 a.m. ET, while S&P 500 e-mini futures were down 1.36% and Nasdaq 100 e-mini futures were down 1.5%.

U.S. stocks, Wall Street dip

Wall Street fell from a record high on Friday after a U.S. air strike in Iraq ratcheted up tensions in the Middle East, while a bigger-than-expected contraction in the U.S. manufacturing sector again fanned fears of slowing economic growth.

Demand for safe-haven assets soared as Iran vowed revenge for the killing of Qassem Soleimani, head of its elite Quds Force, in an air strike authorized by President Donald Trump.

The banks sub-sector dropped about 1% as the news sent benchmark U.S. bond yields to their lowest since Dec. 12. Eight of the 11 S&P 500 sectors were in the red, with only sectors considered defensive plays, such as real estate, trading higher.

“The sharp escalation in tensions related to the Middle East is certainly driving the trading narrative for U.S. stocks,” said Peter Kenny, founder of Kenny’s Commentary LLC in New York.

“Does it mean continued escalation in tension (and) will it end up derailing the U.S. equity rally? I don’t think so, but it’s worth considering.”

The three main stock indexes had closed at record highs on Thursday, as fresh monetary stimulus by China added to investor optimism over trade.

However, denting sentiment on Friday, data showed the U.S. manufacturing sector contracted in December by the most in more than a decade.

At 12:43 p.m. ET, the Dow Jones Industrial Average was down 173.13 points, or 0.60%, at 28,695.67, the S&P 500 was down 14.10 points, or 0.43%, at 3,243.75. The Nasdaq Composite was down 33.40 points, or 0.37%, at 9,058.79.

Safe-haven assets such as gold surged after the air strike, boosting shares of miners Newmont Goldcorp, Kirkland Lake Gold Ltd and Barrick Gold Corp between 0.3% and 0.8%.

Weapons makers Lockheed Martin Corp and Northrop Grumman Corp were the biggest boost to the S&P 500 index, gaining more than 4% after the air strike in Iraq.

Meanwhile, oil prices jumped about 2%, denting shares of American Airlines Group Inc and Southwest Airlines Co .

Meanwhile, Tesla Inc shares hit a fresh record high after beating estimates for vehicle deliveries in the fourth quarter.

Declining issues outnumbered advancers for a 1.17-to-1 ratio on the NYSE and a 1.50-to-1 ratio on the Nasdaq.

The S&P index recorded 16 new 52-week highs and one new low, while the Nasdaq recorded 45 new highs and 10 new lows.

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