* MSCI Asia ex-Japan down 0.47%, trims losses
* Iran launches missile attacks on Iraqi bases housing U.S.
forces
* U.S. President Trump to make statement Wednesday
* Crude futures, gold up amid fears of further escalation
* Asian stock markets: https://tmsnrt.rs/2zpUAr4
By Andrew Galbraith
SHANGHAI, Jan 8 (Reuters) - Financial markets were roiled on
Wednesday after Iran fired missiles at U.S. forces in Iraq,
sending Asian stocks and U.S. Treasury yields sliding and
sharply lifting oil prices as investors feared a wider conflict
in the Middle East.
Iran's missile attacks on the Ain Al-Asad air base and
another in Erbil, Iraq, early Wednesday came hours after the
funeral of an Iranian commander whose killing in a U.S. drone
strike has intensified tensions in the region. By late morning in Asia, however, equities had trimmed
losses, the yen had stabilised somewhat and U.S. bonds tempered
their rally as investors paused for breath, and as a U.S.
official said the United States was not aware of any casualties
from the strikes. "We are getting exaggerated moves but that's of course
volatility playing. Markets simply hate uncertainty. It's an old
adage but it definitely holds true in the current situation -
markets can price risks but they can't price uncertainty," said
James McGlew, executive director of corporate stockbroking at
Argonaut in Perth.
U.S. President Donald Trump said in a tweet late on Tuesday
that an assessment of casualties and damage from the strikes was
under way and that he would make a statement on Wednesday
morning.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS was down 0.47% around 0400 GMT, having dropped
more than 1% earlier in the day. China's blue-chip CSI300 index
.CSI300 was 0.48% lower.
Japan's Nikkei .N225 was down 1.2%, also paring earlier
losses of over 2%, while Australian shares .AXJO clawed back
from a more-than-1% drop to shed just 0.14%. U.S. S&P500 e-mini
stock futures ESc1 , which had earlier dropped nearly 1.7%,
were down 0.26%.
Rob Carnell, Asia-Pacific chief economist at ING in
Singapore, said possible further escalation of tensions between
Iran and the United States could still provoke a prolonged
negative market reaction.
"If you see U.S. treasuries rallying a bit this morning,
expect them to rally quite a bit further should there be a
forceful response from the United States, which I'd imagine
there would be...from a market perspective I think this one
could run and run," he said.
The yield on benchmark 10-year U.S. Treasury notes
US10YT=RR last stood at 1.7899%, down from a U.S. close of
1.825% on Tuesday, but up from session lows. U.S. 10-year
Treasury futures TYc1 had earlier peaked at their highest
level since November, and were last up 0.24%.
The two-year yield US2YT=RR fell to 1.5223% compared with
a U.S. close of 1.546%.
The yen, which had hit its strongest point against the
greenback since October in morning trade, gave up nearly all its
gains midday in Japan. The U.S. currency was last down just
0.06% against the yen at 108.35 JPY= .
The euro EUR= was up 0.03% to buy $1.1154 and the dollar
index .DXY , which measures the greenback against six major
peers, was 0.10% lower at 96.909.
In commodity markets, global benchmark Brent crude futures
LCOc1 shot back above $70 per dollar to their highest level
since mid-September, but were last up 1.61% at $69.37 per
barrel. U.S. crude CLc1 added 1.5% to $63.64 a barrel.
Gold also fell below a key psychological level as initial
fears eased. The precious metal was 1% higher on the spot market
XAU= at $1,590.21 per ounce, having earlier blasted through
$1,600. GOL/
Analysts said markets will be closely watching for
confirmation of any U.S. casualties from Iran's strikes.
"If it does look like we've got U.S. casualties, then I
don't think Trump is going to just stand back and take that,"
said Matt Simpson, a senior market analyst at Gain Capital in
Singapore. "World War III has been thrown around. I don't think
we're there yet. But it does look like Iraq II."
Reports of the attack threw the market off balance after
better-than-expected data in the U.S. non-manufacturing sector
helped to lift the dollar overnight.
The Institute for Supply Management said its
non-manufacturing activity index rose to 55.0 last month from
53.9 in November, indicating a faster rate of expansion.
Shares on Wall Street had nonetheless fallen on Tuesday amid
worries over U.S.-Iran tensions. The Dow Jones Industrial
Average .DJI fell 0.42%, the S&P 500 .SPX lost 0.28% and the
Nasdaq Composite .IXIC dropped 0.03%. .N
Tensions in the Middle East https://www.reuters.com/live-events/tensions-in-the-middle-east-id2917592
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