Hong Kong's Stock Market Surge

In a striking turnaround, Hong Kong's stock market saw buyers return with vigor on Friday, rebounding after a brief dip earlier in the week. This upswing follows a significant stimulus package announced by Beijing, aimed primarily at reviving the beleaguered property sector. Investors have been drawn back into the market, anticipating a resurgence in economic growth, pushing stocks in Hong Kong and mainland China more than 20% higher in recent days.

Hang Seng Index Performance

The Hang Seng Index soared nearly 3% on Friday, propelled by technology companies taking the lead in this rally. Property developers, who have experienced meteoric gains, displayed some volatility as investors awaited further signals from Chinese authorities. Meanwhile, mainland markets were closed for the Golden Week holiday.

Influence of Japanese Politics on Markets

Tokyo also enjoyed gains, albeit amidst a tumultuous week influenced by currency fluctuations following the election of Shigeru Ishiba as Japan's prime minister. The yen initially strengthened, trading below 142 per dollar, fueled by Ishiba’s advocacy for Bank of Japan interest rate hikes. However, the currency later plummeted to over 147 after the new prime minister indicated that Japan wasn't ready for another rate increase this year.

Luca Santos, a currency analyst at ACY Securities, emphasized that investors are likely to remain cautious as they balance Japan's monetary policy shifts against ongoing geopolitical tensions.

Mixed Outcomes in Asian Markets

Asian markets reflected varied outcomes: while Singapore, Seoul, Wellington, Bangkok, and Manila posted gains, cities like Sydney, Taipei, Mumbai, and Jakarta saw declines. Investors keenly awaited crucial US job data later that day, which could potentially influence the Federal Reserve's decisions regarding interest rate adjustments.

Middle East Tensions and Crude Oil Prices

In the Middle East, heightened tensions following recent missile attacks from Iran on Israel have escalated fears of a broader conflict. Crude oil prices have surged approximately 10% since the assault, driven by supply concerns coupled with China's intentions to rekindle its vast economic landscape, which could trigger a substantial rise in demand.

Crude contracts experienced a 5% spike on Thursday, following US President Joe Biden's remarks about potential Israeli retaliatory strikes on Iranian oil sites. However, trading was relatively flat in Asian markets.

Israeli Military Actions and Future Outlook

As Israel conducts ongoing military operations against Hezbollah in Lebanon, Iran has threatened to amplify its response should further action be taken. Despite these tensions, market analyst Tony Sycamore from IG noted that targeting Iranian oil might be unlikely as it could reignite inflation at a time when global central banks are struggling to manage it. Instead, he posited that Israel might focus on military installations instead—reminiscent of similar operations last April.

Looking ahead, the potential for an escalation of hostilities could disrupt Iranian oil supplies, which account for about 4% of global output. However, this potential loss could be mitigated by the prospect of increased Libyan oil production and the lifting of voluntary supply cuts by Saudi Arabia set to expire on December 1.

Market Snapshot (as of 08:10 GMT)