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  • Japanese traders favored risk-off as they return from a week-long break.
  • Downbeat data from China, Japan added to the market’s pessimism.
  • Expectations of further monetary easing, US-China phase-one deal developments and risk-reshuffle question the Bears.

The return of full markets witnesses increasing odds of a US-Iran war after the Middle East nations retaliate to the US killing of their top military personnel. The same, while mixed with disappointing PMI data from China and Japan, keep the MSCI’s index of Asia-Pacific shares outside Japan is down 0.77% ahead of the European session on Monday.

Iran’s attacks on the US targets in Kenya and Baghdad as well as Iraq’s parliamentary vote to push the American forces out of their land grabbed headlines off-late. On the contrary, the US President Donald Trump warned Iraq to bear consequences of heavy sanctions while warning Iran of major retaliation.

Even so, the risk tone seems to have stabilized recently as markets consider the global leaders, like France, Germany and the UK’s, the ability to de-escalate the tension. Also increasing the odds of a no-war situation are Iraq’s lack of a clear leader and the US stage as the world’s largest economy. As a result, the US 10-year treasury yields seesaw near 1.77% whereas S&P 500 Futures take rounds to 3,220/25 with 0.20% loss.

On the data front, December month Jibun Bank Manufacturing PMI from Japan and Caixin Services PMI from China also dragged the market sentiment.

With this, shares in Taiwan and India are more than 1.0% down whereas that of Japan nears 2.0% losses. Further, Hong Kong’s HANG SENG marks the red in -0.70% to 28,256 while Australia’s ASX 200 remains mostly unchanged to 6,735 by the press time.

It should also be noted that prices of crude oil and gold are close to eight-month and 6.5-year tops respectively due to the US-Middle East tension and are negatively affecting the equities.