Hong Kong, mainland China join Asia stock rally as risk-on mood follows Iran war optimism
Hang Seng Index caps its biggest gain in a week after Trump says US will end strikes on Iran, boosting hopes the conflict is close to ending
The Hang Seng Index rose 2 per cent to 25,294.03 at the close, its biggest gain in a week. The Hang Seng Tech Index rallied 2.3 per cent. The mainland’s CSI 300 Index climbed 1.7 per cent and the Shanghai Composite Index added 1.5 per cent.
Trump said the US would end its strikes on Iran and that the two sides could still strike a deal, adding that an agreement with Tehran was not a prerequisite for the war to end. He was expected to give an address to the nation later on Wednesday to provide an “important update” on Iran. Tehran reiterated its demands must be met before the war could end. Crude oil futures slumped about 4 per cent in London and New York.
“Trump setting a two- to three-week horizon for ending the conflict has given the market something it desperately needed – a time frame,” said Stephen Innes, a managing partner at SPI Asset Management. “That is enough to trigger re-engagement. Enough to tell systematic money that the left tail risk is no longer expanding at the same velocity.”
The Middle East hostilities had thrust global financial markets into disarray over the past month, with crude oil surging above US$100 a barrel and investors dumping stocks and bonds on fears of accelerating inflation and slowing growth. The blockade of the Strait of Hormuz and Iran’s assaults on energy infrastructure in the Gulf region heightened jitters that the war would last longer than expected and that its damage to the global economy would be more severe.
Elsewhere in Asia, Japan’s Nikkei 225 surged 5.2 per cent, South Korea’s Kospi soared 8.4 per cent and Australia’s S&P/ASX 200 added 2.2 per cent. That followed a rally in the US overnight, where the S&P 500 jumped nearly 3 per cent for the best single-day performance since May.
In a clear sign of returning risk appetite, the US dollar index, the key haven investors had flocked to as a hedge against the war, dropped for a second day below 100. The yield on 10-year US Treasuries dropped 2.2 basis points to 4.2948 per cent, marking a third day of declines and mirroring fading concerns about inflation.