Geopolitical risk could weigh on ASX

Traders are bracing for a risk-off theme to sweep through equities and bonds, after the US navy moved within striking distance of North Korea on Monday, following a failed ballistic missile launch on Sunday.

While Australia’s stockmarket was closed on Easter Monday, along with Hong Kong, New Zealand and a large portion of Europe, shares around the Asian region were mixed, despite positive data showing China’s economy accelerated for the second straight month.

China’s gross domestic product increased 6.9 per cent in the first quarter from a year earlier, topping economists’ expectations for growth of 6.8 per cent. Retail sales and industrial output increased in March.

Japan’s Topix index was little changed, trimming earlier declines, while the Shanghai Composite Index was down 0.7 per cent on Monday afternoon, paring an earlier loss of 1.1 per cent.

The prevailing geopolitical concern has seen safe-haven plays such as gold and the Japanese yen move significantly higher, while US Treasuries extended last week’s flight to quality.

“With all the military adventurism in play, those insidious wartime market correlations take force as the risk-off theme grips markets,” said

Stephen Innes, senior trader at OANDA.“To what extent the markets need to price in geopolitical risk more actively into their psyche will likely drive nearer term sentiment. There’s no question the world has become a more sensitive and scarier place in the last fortnight.”

The Sydney Morning Herald

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Stephen Innes

Stephen Innes

Head of Trading APAC at OANDA
Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes