* 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
jolting oil prices higher 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 in the day came hours after the
funeral of an Iranian commander whose killing in a U.S. drone
strike has intensified tensions in the region. Early reports of the attacks sparked a sudden rise in risk
aversion on worries over how the United States would respond.
But by early afternoon, Asian equities had trimmed losses, the
yen had stabilised somewhat and U.S. bonds tempered their rally
as investors paused for breath.
"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. Trump said that "All is well!" and "So far, so good!".
A U.S. official said the United States was not aware of any
casualties from the strikes. MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS was down 0.5% around 0445 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 1.29%, also paring earlier
losses of over 2%, while Australian shares .AXJO clawed back
from a more-than-1% drop to shed 0.18%. U.S. S&P500 e-mini stock
futures ESc1 , which had earlier tumbled nearly 1.7%, were down
0.28%.
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 1.7864%, 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 1.5183% 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 most of its
gains later in the day. The U.S. currency was last down just
0.08% against the yen at 108.33 JPY= .
The euro EUR= was 0.04% weaker, buying $1.1147 and the
dollar index .DXY , which measures the greenback against six
major peers, was 0.07% lower at 96.940.
In commodity markets, global benchmark Brent crude futures
LCOc1 shot back above $70 per dollar to their highest level
since mid-September in the initial hours after Iran's strikes.
They were last up 1.36% at $69.20 per barrel, while U.S.
crude CLc1 added 1.26% to $63.49 a barrel.
Gold also fell below a key psychological level as initial
fears eased. The precious metal was 1.16% higher on the spot
market XAU= at $1,592.18 per ounce, having earlier blasted
through $1,600. GOL/
On Tuesday, shares on Wall Street had 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
Analysts say the escalating Middle East tensions are likely
to keep markets on edge.
"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."
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Tensions in the Middle East https://www.reuters.com/live-events/tensions-in-the-middle-east-id2917592
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>