- South Korea stocks tumble, Japan, Taiwan also slip
- Gold rebounds after Tuesday's slump
- Wall Street stocks follow gain in European shares
- Oil futures fall modestly
NEW YORK/LONDON, March 4 (Reuters) - After some steep losses in Asian markets, U.S. and European shares were rising on Wednesday as oil prices took a step back after a dramatic two-day rally and a jump in cryptocurrency encouraged investors even while they cautiously monitored the Middle East war.
The dollar fell and U.S. Treasury yields were rising for a third straight day, even as the U.S. and Israel pressed on with round-the-clock assaults on Iran. Also, a U.S. submarine sank an Iranian warship off the southern coast of Sri Lanka, and Turkey said that NATO air defences destroyed a ballistic missile fired from Iran.
Traders said that during the European session, stocks were supported by a New York Times report that operatives from Iran’s Ministry of Intelligence reached out indirectly to the CIA the day after U.S. and Israeli attacks on Iran began, with an offer to discuss terms for ending the conflict. However, Iran's ambassador to the United Nations in Geneva on Tuesday had ruled out for now any negotiations with the United States.
"The market is cautiously optimistic around the Iran, US, Israel conflict, in the sense of, hopefully, it will be a short endeavor," said Ben Sullivan, chief investment officer at AE Wealth Management.
On Wall Street traders were encouraged by a dip in oil prices and a strong rally in bitcoin along with gains in the semiconductor sector and recently battered software stocks, according to Michael James, equity sales trader, Rosenblatt Securities.
"You combine all of those and it equates to a market that's feeling further emboldened," said James, adding that bitcoin's gains encouraged long-term and short-term traders to take on risk.
"The fact the stock market has rallied impressively off two gap down lows Monday and Tuesday morning, and recovered meaningfully, gave some added conviction to the bulls," he said.
In cryptocurrencies, bitcoin gained 7.77% to $73,338.07. Ethereum rose 9.15% to $2,149.09.
On Wall Street at 11:54 a.m. ET (1654 GMT) the Dow Jones Industrial Average rose 329.68 points, or 0.68%, to 48,832.84, the S&P 500 rose 60.03 points, or 0.88%, to 6,876.69 and the Nasdaq Composite rose 330.30 points, or 1.47%, to 22,846.99.
MSCI's gauge of stocks across the globe rose 2.76 points, or 0.27%, to 1,032.54 while the pan-European STOXX 600 index rose 1.37%.
However, in Asia equity investors were a lot more bearish.
In South Korea, the KOSPI benchmark closed down 12%, the index's largest drop on record. South Korea is heavily reliant on Middle Eastern oil. While the KOSPI was still showing a more than 20% year-to-date gain, over two days the tech-heavy index has lost more than 18% of its value while the currency slumped to a 17-year low.
Japan's Nikkei fell 3.6% and Taiwan stocks dropped 4.3%.
In currencies, the U.S. dollar slipped, pulling back from the multi‑month highs it touched in the previous session, as investors unwound safe‑haven positions on rising hopes that the Middle East conflict may prove shorter‑lived than initially feared.
The dollar index , which measures the greenback against a basket of currencies including the yen and the euro, fell 0.29% to 98.79, with the euro up 0.21% at $1.1638.
Against the Japanese yen , the dollar weakened 0.51% to 156.89 while sterling strengthened 0.09% to $1.3368.
In government bonds, U.S. Treasury yields advanced as investors gauged the likelihood of higher inflation and the path of monetary policy as the war in Iran continues to put oil prices at risk of rising further.
The yield on benchmark U.S. 10-year notes rose 1.2 basis points to 4.069%, from 4.057% late on Tuesday while the 30-year bond yield rose 0.8 basis points to 4.7107%.
The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 1.6 basis points to 3.517%.
For now, oil prices paused their rally after the report about Iranian operatives seeking U.S. talks to end the Middle East conflict. Still, U.S. and Israeli strikes against Iran escalated the conflict and paralysed shipping through the Strait of Hormuz, disrupting oil shipping for a fifth day.
U.S. crude fell 0.63% to $74.09 a barrel and Brent fell to $81.06 per barrel, down 0.38% on the day.
Trading in precious metals was boosted by the pause in the dollar's rally and appeared to suggest that investors were still counting on safe-have assets because of the uncertainty brought by the war.
Spot gold rose 1.21% to $5,148.17 an ounce. U.S. gold futures rose 0.7% to $5,143.00 an ounce. Spot silver rose 2.08% to $83.73 an ounce.
Reporting by Tom Westbrook and Rae Wee in Singapore, Alun John in London, Sinéad Carew in new York; Editing by Jacqueline Wong, Hugh Lawson, William Maclean
Source: Reuters