Gold prices hit an eight-week peak on Monday, oil futures traded near record highs and the dollar advanced against the yen and euro as investors sought safe-havens on escalating conflict in the Middle East.
SINGAPORE: Gold prices hit an eight-week peak on Monday, oil futures traded near record highs and the dollar advanced against the yen and euro as investors sought safe-havens on escalating conflict in the Middle East.
"Safe-haven flows are driving the market and with a further escalation of violence in the Middle East, people are thinking that this is likely to take centre stage for markets," said Jan Lambregts, head of research, Asia, at Rabobank in Singapore.
In Asia, the MSCI index of major Asian stocks outside of Japan fell 1.2 per cent.
European stocks are likely to slip with spread betters in London calling Britain's FTSE 100, France's CAC 40 and Germany's DAX indexes 16-26 points lower at the start of trading.
Hong Kong''s Hang Seng stock index fell for the third straight day, shedding almost 1 percent to a two-week low, led by a 0.7 per cent decline in shares of HSBC Holdings Plc. and a 0.9 per cent decline in China Mobile.
Australia's benchmark PASX 200 stock index ended the day 0.5 per cent lower, after hitting a four-week low earlier in the day, led by a 1.7 percent drop in ANZ Banking Group, while the less risky Australian government bonds rose.
Financial markets in Japan and South Korea were closed for holidays.
Israeli air strikes killed 17 people in Lebanon on Monday, and Hizbollah announced more rocket attacks after striking Haifa, Israel's third-biggest city, over the weekend raising the death toll in the six days of violence to 162 people, all but 13 of them civilians.
With no diplomatic initiative in sight to end the fighting, analysts said the conflict could spread through the Middle East to include Iran and Syria and roil a region that supplies almost a third of the world's crude oil.
"It's geo-politics at the fore," said Justin Smirk, senior economist at Westpac in Sydney.
"Israel has been the key story over the weekend, with oil investors keenly watching supply-side risk should the conflict look like expanding".
Listening to noises out of Iran and Syria there is clearly a risk the violence could spread elsewhere in the region.
U.S. front-month crude oil futures were trading around $77.60 per barrel, above closing levels in New York and near Friday's record of $78.40.
Oil prices have climbed almost 12 per cent in the past month and have nearly doubled in the past two years, partly because of conflicts in key producers such as Iraq and Nigeria and more recently because of security concerns over Iran and North Korea''s nuclear ambitions.
These have occurred at a time when demand is soaring in rapidly developing economies such as China and India.
GOLD RUSH: Rising oil prices have triggered inflationary pressures worldwide, spooking investors who flocked to gold and other assets that are traditionally seen as a shield against wealth erosion caused by accelerating prices.
Spot gold prices rose on Monday to $675.00 an ounce, their highest level since the middle of May.
Gold has rebounded after plunging from a record high of $730 in May to a low of $543 in June.
``It looks like gold is certainly going to test higher at some point, unless it calms down which looks very unlikely. We don't seem to have any rationality when it comes to dealing with the Middle East, said Darren Heathcote, head of trading at Investec Australia in Sydney.
The escalating violence in the Middle East and rising inflationary pressures -- which have caused the U.S. Federal Reserve to raise its key interest rate 17 times over the past two years -- have also helped the dollar, the world's most liquid currency.
The dollar rose as high as 116.39 yen on Monday, its highest level in just over two weeks. The euro weakened to about $1.2622, its lowest level since June 29.
"The escalation of violence in the Middle East over the weekend should continue to see the U.S. dollar supported as the week gets underway," said Tony Morriss, a senior currency strategist at ANZ Investment Bank.
The yen failed to benefit from the Bank of Japan's decision on Friday to raise its benchmark rate for the first time in six years to 0.25 percent from zero.
Analysts said BOJ's statement after the rate hike suggested that further rate increases would be few and far between.
``There has been little support from Friday's rate hike as the BOJ will move cautiously in coming months," Morriss said.
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