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GLOBAL MARKETS-Asian shares rebound as U.S. and Iran stand down, yen retreats

Published 09/01/2020, 07:57
Updated 09/01/2020, 08:00
© Reuters.  GLOBAL MARKETS-Asian shares rebound as U.S. and Iran stand down, yen retreats
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* Safety rush turns to relief rally as Mideast tension ebbs

* Nikkei adds 2%, Australia hits record closing high

* Yen slides to two-week low

* Support for oil and gold hints at caution remaining

* Asian stock markets: https://tmsnrt.rs/2zpUAr4

By Tom Westbrook

SINGAPORE, Jan 9 (Reuters) - Asian stocks had their best

session in weeks on Thursday, as the United States and Iran

backed away from the brink of conflict in the Middle East and

investors reversed their flight to safety.

U.S. President Donald Trump responded to an Iranian attack

on U.S. forces with sanctions, not violence. Iran offered no

immediate signal it would retaliate further over a Jan. 3 U.S.

strike that killed a senior military commander.

MSCI's broadest index of Asia-Pacific shares outside Japan

.MIAPJ0000PUS rose 1.3%, its sharpest gain in almost a month.

Hong Kong's Hang Seng .HSI and Shanghai blue chips

.CSI300 each added more than 1%, while Japanese stocks .N225

rose further, gaining 2% to their highest for the year so far.

Australian stocks .AXJO rose 0.8% to a record closing

high. Futures markets pointed to extended gains in Europe and

the United States, with S&P 500 futures ESc1 up 0.2% and

German DAX futures 0.9% higher FDXc1 .

"I think today is a bit of a relief rally," said Shane

Oliver, Chief Economist at AMP Capital in Sydney.

"Yesterday, investors were fearing the worst, that this was

the escalation now underway. The news overnight has been more

along the lines that Iran pulled its punches and Trump is toning

things down," he said, "which is seen by investors as

substantially reducing the risk of a war."

Investors quit the safe-haven Japanese yen JPY= , sending

it sliding from a three-month high to a two-week low of 109.32

yen per dollar. FRX/

Oil is cheaper than it was before the killing of the Iranian

commander, Qassem Soleimani, in Baghdad, a strike that raised

fears of an escalating regional conflict. O/R

Brent futures LCOc1 prices steadied at $65.41 per barrel,

about where they began the year.

Gold XAU= gave back sharp gains made on Wednesday but

remains dearer than before Soleimani's death, in an indication

that investors' fears have not completely evaporated. GOL/

It drifted lower to $1,544.80 per ounce.

SANCTIONS NOT STRIKES

Iran fired missiles at military bases housing U.S. troops in

Iraq on Wednesday in response to Soleimani's killing. But Trump

said no Americans were hurt and made no direct threats of a

military response in an address to the nation on Wednesday.

"Iran appears to be standing down, which is a good thing for

all parties concerned and a very good thing for the world," he

said. He announced economic sanctions on Iran without giving

details.

Iranian Foreign Minister Mohammad Javad Zarif had earlier

said the strikes "concluded" Tehran's response to the killing of

Soleimani.

Outside equities, U.S. Treasuries, which had soared in the

flight to safety a day ago also settled back, with yields on the

benchmark 10-year U.S. Treasury note US10YT=RR at 1.8685%,

after dropping as low as 1.705%.

Risk appetite was also evident in currency markets, with

China's trade-exposed yuan CNY= standing at a five-month high

of 6.9281 per dollar and the Aussie AUD= creeping higher.

"All is well - so says Trump! That is the mood today," said

Bank of Singapore currency strategist Moh Siong Sim, a reference

to Wednesday's upbeat tweet from the president.

"I think that neither side wants to have a further

escalation in tension, and both parties seem to be standing

down."

Mideast tensions ease https://tmsnrt.rs/305Wf0t

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(Editing by Lincoln Feast and Jacqueline Wong)

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