Traders work on the floor of the New York Stock Exchange on August 16, 2023 in New York City.Thank you for reading this post, don't forget to subscribe!
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The market allayed fears
US stocks rose on Monday despite a 4% rise in oil prices due to the Israel-Hamas war. Even the Russell 2000 rose, indicating investor confidence. Asia-Pacific markets were mostly higher on Wall Street on Tuesday. Japan’s Nikkei 225 rose around 2.5%, led by gains in energy stocks and trading houses. However, mainland China’s Shanghai Composite fell 0.5%.
‘Complete siege’ of Gaza Strip
Israel continued airstrikes on the Gaza Strip on Monday – and planned to cut electricity, water and food supplies – in response to Saturday’s attack by Palestinian militant group Hamas. There have been more than 1,500 deaths so far from both sides. Meanwhile, Iran’s Permanent Mission to the United Nations has denied the country’s involvement in the Hamas attack on Israel.
Country Garden shares fell more than 7% on Tuesday after the troubled Chinese real estate developer failed to repay a 470 million Hong Kong dollar ($60 million) loan. What’s worse, Country Garden said it may not be able to make all of its foreign payments, including those issued in US dollars. Contracted sales in September fell 80.7% from a year earlier.
rapidly growing digital economy
Singapore’s digital economy contributed 106 billion Singapore dollars ($77.5 billion) to the economy last year, more than 17% of GDP. In contrast, in 2017, the amount was SG$58 billion, accounting for 13% of GDP. “Despite recent layoffs in the tech sector, demand for tech jobs is likely to remain resilient,” the country’s Infocomm Media Development Authority said.
[PRO] ‘bright spot’
Goldman Sachs said Japan’s market is now a “bright spot” globally. One segment of the market has grown nearly 30% so far, thanks to two developments within the country. And Goldman thinks both of these stocks, which are on the bank’s punishment list, could rise closer to 20%.
Major indices rose despite geopolitical turmoil in the Middle East.
Of course, some might attribute that increase to the usual suspects profiting from armed conflicts. Oil and gas giants are excited by the rise in crude oil futures prices. Defense stocks also rose, especially after Bank of America said the US government may increase defense investment.
But Anna Rathbun, chief investment officer at CBIZ Investment Advisory Services, believes these movements in specific sectors are mostly “a knee-jerk reaction” as investors are not sure how an Israel-Hamas war would play out.
“So there’s dust going up, and now there’s dust coming back down,” Rathbun said. “I think it will take a few days to really understand where the impact really is.”
However, in terms of broader moves, analysts believe the market has already digested the implications of the conflict over the weekend.
The S&P 500 rose 0.63%, the Dow Jones Industrial Average rose 0.59% and the Nasdaq Composite climbed 0.39%.
“As long as … diplomatic efforts continue to focus on keeping the conflict under control, the market looks at this and says, we’ve seen this before,” said Quincy Crosby, chief global strategist at LPL Financial.
Reiterating this, Mira Pandit, global markets strategist at JPMorgan Asset Management, said on CNBC, “The impact in the long run is moderated to some extent by geopolitical events.”
In another vote of confidence, even the Russell 2000 index of small-cap companies rose 0.6% — outperforming the Dow and Nasdaq. As I’ve noted before, the Russell 2000 reflects macroeconomic conditions more accurately and quickly than major indices. So yesterday’s gain may be a sign that the market is “preparing for a turn,” as Crosby puts it.
It may seem troubling that markets are recovering just as a fresh, deadly conflict is erupting. But it confirms what we have seen this year: Russian aggression in Ukraine had only a mild impact, if any, on the US economy and markets.