Asian stocks saw early gains erode by midmorning Monday, led by declines in Hong Kong and Chinese equities as investors assess airstrikes against Syria over the weekend and focus on the start of earnings season in the U.S. as well as speeches by Federal Reserve officials.
Trading volumes in the U.S. hit 2018 lows last week on growing geopolitical concerns about trade and the Middle East, which weighed on activity in Asia as well.
As the Syrian airstrikes by the U.S. and allies weren’t as robust as some thought they could have been, Asian equities had an early upward bias while oil futures fell about 1% as some of the fear premium in energy markets evaporated. Crude-oil prices surged 8% last week, the most since December 2016.
“The markets are very insensitive to the issue in Syria,” said Jane Fu, a sales trader CMC Markets. “It’s kind of a unanimous view across different asset classes that traders are not pricing in any of this geopolitical risk.”
With local factors taking center stage, Hong Kong HSI, -1.47% and Chinese benchmarks SHCOMP, -1.50% fell as much as 1% Monday morning. Though indexes in both locales logged their biggest gains in more than a month last week, they fell on Thursday and Friday. That selling extended as weakness was centered in financials on Monday. China Construction Bank 0939, -2.08% and AIA 1299, -2.41% each declined 2%.
Meanwhile, Australia’s S&P/ASX 200 XJO, +0.21% rose 0.4%. Despite the pullback in oil, energy stocks led with a 1.2% advance, putting gains so far this month at 6.8%. Japan’s Nikkei Stock Average NIK, +0.26% gained 0.2%.
Meanwhile, S&P 500 futures ESM8, +0.44% rose 0.5%, putting the U.S. benchmark on track to reverse Friday’s 0.3% decline in thin trade.
Currency markets were generally quiet Monday, though the Australian dollar was an early outperformer.
Beyond geopolitics, first-quarter reports from U.S. companies will be in focus this week, starting with Netflix later Monday and ending with General Electric on Friday.
Separately, many Federal Reserve officials are scheduled to deliver speeches this week, including the incoming head of the New York Fed, John Williams. Traders will look to the speeches for clues on how fast the pace of 2018 rate increases could be as well as the economic outlook, said Fu.