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Sell off on heap of bad geopolitical news

Asian investors will be waking up to a slew of bad news from around the world, which have fuelled the demand for safe haven assets.

Gold bars
Source: Bloomberg

On the geopolitical risk front, tensions have escalated in Ukraine with the shooting down of a Malaysian Airlines plane over its airspace, which left all of the estimated 295 passengers onboard dead.

In the Middle East, Israel has stepped up its offensive and has sent troops into Gaza.

How did the market react?

Overnight, investors scrambled for safe haven assets such as gold and the Japanese Yen, while oil prices have crept up. Reflecting the fear among investors, the Volatility Index (VIX) shot up 32.18% to 14.54 – its highest level in three months and sharpest daily spike in half a year.

Gold jumped over 1.4% to $1,319 an ounce – extending a third day of gains. Year-to-date, it has rallied 9.5% amid rising conflict in Iraq, and the US and EU sanctions against Russia.

The Japanese yen held on to its overnight gains, after it rose 0.30% against the greenback.

Oil prices, which gained earlier on the sanctions against Russia, gained more traction. WTI Crude rose by nearly 2% and closed at $103.19 per barrel, while Brent for September rose 1.9% to settle at $107.89.

There was a lot of selling pressure on Wall Street with investors cashing out on fear. This sent all the major bourses lower and the Dow Jones Industrial Index back below the 17,000 point level. 

Ahead of the Singapore Open

Investors are likely to be jittery going into the Asian trading session.

It won’t be helped with rising concerns about a second onshore bond default in China, indicating more signs of stress on the corporate debt front. Builder Huatong Road & Bridge Group might miss its $64.5 million note payment next week and will be the second to do so after Shanghai Chaori Solar Energy Science & Technology in March.

China will be releasing property prices for June later this morning. This will be closely watched after the prior month registered its first drop in two years. Investors are unlikely to have the appetite for any subpar numbers, which could send markets lower.

We are calling for the MSCI Singapore to drop 0.69% to 374.56 points.

Gold chart
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