Investing.com - Asian markets kicked off the week on shaky ground, with shares slipping on Monday amid the looming threat of a broader conflict in the Middle East. This development adds to an already tense week filled with key data on U.S. growth and inflation, as well as earnings reports from some of the world's tech giants.
Bonds came under strain as U.S. 10-year Treasury yields edged dangerously close to the 5.0% mark. This surge in global borrowing costs is putting equity valuations to the test.
Over the past weekend, Washington cautioned of a significant risk to U.S. interests in the Middle East, as ally Israel intensified its strikes on Gaza and border conflicts with Lebanon escalated.
This week also sees policy meetings from the European Central Bank and the Bank of Canada. While no hikes are anticipated, investors will be keenly watching for any indications of future shifts.
The recent surge in bond yields has effectively tightened monetary conditions without requiring active intervention from central banks. This allows the Federal Reserve to suggest that it's likely to hold steady at its policy meeting next week.
The yield jump has challenged equity valuations and pulled most major indices lower last week, with the VIX 'fear index' of U.S. stock market volatility reaching its highest point since March.
On Monday, iShares MSCI Pacific ex Japan ETF (NYSE:EPP) shares outside Japan retreated 0.4%, hitting its lowest point in almost a year. China's blue-chip index also fell 0.7%, reaching its weakest level since early 2019.
Japan's Nikkei 225 and South Korea's KOSPI 200 both eased by 0.7% and 0.6% respectively. Euro Stoxx 50 Futures and FTSE 100 Futures were 0.1% and 0.3% higher respectively, while S&P 500 futures and Nasdaq futures gained 0.2%, buoyed by the anticipation of a wave of earnings reports this week.
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Tech behemoths, including Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc Class A (NASDAQ:GOOGL), Amazon.com Inc (NASDAQ:AMZN), and Meta Platforms Inc (NASDAQ:META), are all slated to report, along with IBM (NYSE:IBM) and Intel (NASDAQ:INTC).
Strong consumer demand is expected to bolster profits, with U.S. gross domestic product figures this week projected to show an annualized growth of a robust 4.2%, and nominal growth possibly reaching 7%.
The dollar has been underpinned by this U.S. outperformance, although the threat of Japanese intervention has kept it around 150.00 yen for now. The dollar was last trading at 149.90 yen, just below its recent peak of 150.16.
The Euro remained flat at $1.0582, while the Swiss franc, having benefited from safe-haven flows over the past couple of weeks, held firm at 0.8927 per dollar.
Amid the Middle East tensions, gold also attracted a safety bid, standing at $1,970 an ounce and reaching its highest level since May last week.
Oil prices eased slightly in the absence of any disruption to supplies from the Middle East, at least for now. Brent was last down 0.9% to $91.31 a barrel, while U.S. crude to $87.14.