Asian stocks are set for a cautious start on Monday as increased geopolitical risks combined with expensive valuations prompt investors to shun risky assets in favor of safe-haven bets such as government debt. Top aides to U.S. President Donald Trump differed on Sunday on where U.S. policy on Syria was headed after last week’s attack on a Syrian air base, while U.S. Secretary of State Rex Tillerson warned the strikes were a warning to other nations, including North Korea. A U.S. Navy strike group will be moving toward the western Pacific Ocean near the Korean peninsula as a show of force, a U.S. official told Reuters on Saturday, as concerns grow about North Korea’s advancing weapons program.
MSCI’s broadest index of Asia-Pacific shares outside Japan is likely to edge lower at open after falling 0.4 percent on Friday. “Shares remain vulnerable to a short term pull-back as investor sentiment towards them is very bullish and a lot of good news has been factored in which has left them vulnerable to any bad news,” said Shane Oliver, head of investment strategy at AMP Capital in Sydney. Data also offered little support with major U.S. indexes closing lower in choppy trade after a key jobs report on Friday showed the economy added 98,000 jobs in March, the fewest since last May and well below economists’ expectation of 180,000, as bad weather hit construction hiring.
With valuations on the S&P 500 at its highest levels since 2004 on a forward price-to-earnings basis, market watchers will be hoping for stellar earnings results in the March quarter to keep markets propped up. The yen, a favoured haven in times of stress, was holding its own against the dollar in early trades at 111.27 yen, after touching 110.14 on Friday, its lowest since March 28.
Yields on 10-year U.S. Treasuries closed at 2.37 percent on Friday after briefly breaking a significant chart barrier at 2.30 percent for the first time this year. Spot gold was last at $1,254.70 per ounce. It has rallied nearly 5 percent over the past month. Oil prices held firm at $52.50 per barrel, on risks that the Syria conflict may spread more widely within the oil-rich Middle East region.