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Market Brief: Nikkei 225, Shanghai Composite Closed in the Green Before Iran Reiterated Threats

Nikkei 225 m
Nikkei 225

Asian Equities Markets Recoup Losses

Asian equities traded in the bulls’ territory today as concerns in the US-Iran conflict abated. The Nikkei 225 was up over 370 points or 1.60% at 23,575.7. Meanwhile, the Shanghai Composite Index was in the green by 21.393 points or 0.69% at 3,104.802. Luckily for the two equities markets, headlines were quiet while trading in Tokyo and Shanghai were still open.

Yokogawa Electric Corp. led gains in the Nikkei 225 at 5.63%. It was then followed by FUJIFILM holdings with a 5.60% profit. Meanwhile, Zhejiang Guangsha Co. was the top performer in the Shanghai Composite Index.

On the other hand, the biggest losers in the Nikkei 225 and Shanghai Composite Index were: Z holdings Corp (-1.09%) and Shandong Huifa Foodstuff (-10.01%), respectively.

Market sentiment improved overnight as headlines were blank for updates on the US-Iran conflict. After Iran warned of a retaliation following the death of Iranian General Soleimani, investors were kept on the edge of their seats and braced for more violence to ensue. However, today’s the early part of today’s Asian session turned out to be quiet.

It may have also helped that a report from China cited that a Chinese delegation is preparing to fly to Washington. It is said that the Phase One Deal between the US and China will be signed on January 13. This news may have also helped calm the nerves of investors.

Risk Aversion Picks Up Again?

It’s worth noting that the Hang Seng Index was initially up by as much as 140 points or 0.50% at 28,366.00. However, fresh headlines from Iran may be stirring up risk aversion. Hong Kong’s stock index gains have been cut to 80 points in a matter of minutes as the Hang Seng Index trades at 28,309.6. Higher-yielding currencies like the Kiwi and the Aussie are also trading in the red. NZDUSD and AUDUSD are down by about 15 pips from their opening prices, trading at 0.6656 and 0.6913,respectively.

There were reports released in the past hour saying that Iran is currently looking at 13 retaliation “scenarios”. It is said that even the mildest attack would bring about a “historic nightmare”. The country’s parliament also voted to label the US pentagon as a terrorist group today. Some market analysts say that this could precede a potential attack on US bases as Iran previously warned.

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AUDUSD Outlook

On the daily time frame, AUDUSD looks to be testing support at the rising trend line. If Iran does not follow up on its threat, risk aversion could once again be muted and AUDUSD may find bids around the 0.6900 handle. On the other hand, if risk aversion is sustained throughout today’s trading, a bearish close below 0.6900 could mean that the currency pair is headed to its December 18 low at 0.6940 where it could test the 200 SMA for support.