Panic Selling Averted as Asian Markets Fall, Japan Down 1.35% [Middle East in Turmoil]

TOKYO — Asian stock markets broadly declined on the 2nd following airstrikes on Iran by the United States and Israel, but a full-blown panic sell-off was avoided.
The Nikkei 225, the benchmark index of the Japanese stock market, closed at 58,057.24, down 793.03 points, or 1.35%, from the previous session. It was the first decline in five trading days. At one point during the session, the index plunged more than 1,500 points as investors rushed to reduce risk in response to the US–Israel attack on Iran. However, losses narrowed as bargain hunters stepped in, helped by expectations that instability in the Middle East will be contained quickly and by optimism over the policy agenda of the cabinet led by Sanae Takaichi.
The Taiwan stock market, which has a high weighting of semiconductor stocks and often moves in tandem with South Korea, also avoided a steep sell-off. The Taiwan Capitalization Weighted Stock Index (TAIEX) ended the day at 35,095.09, down 319.40 points, or 0.9%, from the previous session.
By contrast, China’s Shanghai Composite Index (SSE Composite Index) rose. It finished at 4,182.59, up 19.71 points, or 0.47%, from the prior day. In foreign exchange and commodities markets, risk aversion drove gains in safe-haven assets such as the US dollar and gold.
In the Tokyo foreign exchange market, the yen weakened, with the dollar–yen rate at one point climbing into the ¥157-per-dollar range. This was the first time it had reached the 157 level since the 9th of last month. A widening trade deficit in Japan and expectations of increased real-demand selling of the yen contributed to continued yen weakness and dollar strength.
For countries that rely on imports for crude oil, a rise in oil prices increases the amount of money that must be paid overseas. This often leads to real-demand selling of the yen and buying of the US dollar.
Gold futures prices also strengthened. According to Investing.com on the 1st local time, April gold futures on COMEX, the metals division of the Chicago Mercantile Exchange (CME), were trading at $5,342.90 per ounce, up $95, or 1.81%.
Market participants are closely watching developments, judging that, unlike the US strike on Iran last June, the trajectory of the current situation is difficult to predict. Yutaro Suzuki, an economist at Daiwa Securities, said, "Because it is hard to factor in how the situation in the Middle East will unfold and what impact it will have, trading is currently limited to short-term moves focused on sectors that can react immediately." Analysts also noted that the latest decline was driven largely by futures selling by short-term investors.
sjmary@fnnews.com Reporter