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Markets in Asia bear the burden of risk aversion, higher oil prices.

Earlier gains following Wall Street couldn’t last long as US-Iran tension is set to worsen.

Fading US-China trade optimism, Japan off also weigh on trade sentiment.

Equities in Asia differ from Wall Street as the latest tension between the US and Iran weighs on the market’s risk appetite and adversely affects the stocks. In doing so, the MSCI index of Asia-Pacific shares marks a 0.15% loss to 695.66 ahead of the European session on Friday.

The US confirmed killing the top Iranian commander in airstrikes near Baghdad airport. This led to the market’s rush for risk-safety and a sudden increase in oil. On the contrary, stocks and the Australia dollar (AUD), often considered as a proxy to risk, dropped after the news.

Read: Iran Supreme Leader Khamenei: Harsh revenge awaits “criminals” who killed Soleimani

Also weighing on the market’s risk sentiment was increasing doubts over the US-China phase-two talks. The Hill came out with the story, while citing thorny unsolved issues, which said that Phase two of the US-China trade deal will be more challenging and less transparent than phase one.

Given the market’s in Japan still off celebrating the New Year, the US bond yields fail to portray risk-off mood. However, S&P 500 Futures’ drop of near 0.8% from the previous day’s positive closing could be watched to gauge the investors’ mood.

It’s worth mentioning that the economic calendar was mostly light and offered no major direction. Even so, Asian shares initially followed gains of the US equity benchmarks. Though, a sudden increase in risk aversion led to the recent declines of Asian stocks.

With this, stocks in China and India register mild losses whereas markets in Australia and New Zealand are still cheering the People’s Bank of China’s (PBOC) measures to ease domestic liquidity. Further, Hong Kong’s HANG SENG also follow the suit while marking 0.33% loss by the press time.