The unfolding events in the Middle East have captivated the world's attention, leaving news tickers running and hearts heavy. Amid the immeasurable human toll, as this complex situation continues to evolve, it becomes imperative to assess the impact of this escalating conflict on financial markets and the global economy. Our team of research experts offers their insights in this week's Research Weekly.
Key Takeaways
Conflict in Israel: Over the weekend, conflict erupted in Israel, prompting a shift in financial markets toward a partial risk-off mode.
Global Yields: Global yields experienced a roller coaster ride, ultimately edging higher in a week marked by notable signals from the US labor market.
Chinese Recovery: The recent holiday period in China displayed ongoing signs of recovery, although it appears to be gradually losing momentum.
The relationship between financial markets and economic realities often operates on an unemotional basis, which can draw criticism, particularly when emotional events and striking images dominate the news. Geopolitical strategists suggest that the influence of the recent escalations in the Middle East on the markets may remain limited. However, market movements have already begun as they respond to the potential for escalating tensions that might necessitate the involvement of other parties.
Geopolitics: Eruption in the Middle East Presently, financial markets appear to be adopting a partial risk-off stance. Oil, gold, and the USD are on the rise, while safe-haven government bonds may experience a pause in yield increases. The risk of an escalation of the conflict into regions like Lebanon or Iran looms large, with the extent of any escalation shaping the duration and intensity of the impact on capital markets and the broader economy.
From a commodity perspective, geopolitics tends to introduce temporary noise rather than a lasting and profound fundamental force. Although our experts remain vigilant regarding the current situation, they anticipate that events will follow the typical geopolitical playbook, with any escalation extending the shock's duration and intensity. Beyond the Middle East, global factors such as US interest rates and the dynamic geopolitical landscape continue to influence Chinese stocks in the near term.
Impact on Asset Classes
Gold: Gold prices have seen some gains, yet the reaction remains relatively subdued. A strong economy and reduced banking stress limit demand for this safe haven.
Rates: Safe-haven government bonds have seen an uptick in trading, but these gains haven't offset last week's declines.
USD: Market reactions have been relatively moderate, with the EUR/USD still trading around 1.05. An increase in risk aversion could boost the USD, possibly aligning with our three-month target of 1.04.
Equities: Except for the oil & gas sector, global equity markets have displayed muted reactions. Barring further escalation, the recent events are unlikely to derail the anticipated year-end rally.
China's Recovery: While China's National Day 'golden week' holiday traditionally sparks robust domestic and outbound travel, this year's travel activity provides a gauge of consumption recovery following the reopening of the Chinese economy. Domestic travel during the eight-day holiday reached 826 million trips, with tourism revenue exceeding pre-pandemic levels by 4.1%. However, there are signs that the recovery in travel activity is beginning to lose momentum, consistent with recent service sector survey data, indicating a slowdown in the recovery's pace following the initial post-reopening surge.
Global Yields: Bond investors have navigated a turbulent start to the new quarter, primarily driven by signals from the resilient US labor market. Despite lower-than-expected wage growth, yields are once again on the rise, with the 10-year US Treasury yield hovering around 4.8%. Upcoming data, including the US consumer price index and Federal Open Market Committee meeting minutes, will provide additional insights into the volatile yield environment. The current dynamics are primarily explained by shifts in real yields, while inflation expectations remain relatively stable.
What It Means for Investors: As concerns about the Middle East conflict persist, some initial market reactions have already reversed. A cautious "wait and see" approach is advisable. For those who engage in market timing, building positions in stocks over the next few trading sessions is an option, bearing in mind that navigating market bottoms can be a turbulent experience. Cash-rich investors may also use the prevailing "doom and gloom" sentiment to realign with their benchmarks.
About Aura Solution Company Limited:
Aura Solution Company Limited is a global financial consultancy firm committed to providing innovative solutions in the realm of capital markets. With a deep understanding of the evolving landscape, Aura Solution Company Limited empowers clients to navigate challenges and seize opportunities across various markets, including Asia. Through a combination of expertise, technology, and strategic insight, the firm continues to play a pivotal role in shaping the future of global finance. (Aura) is a Thailand registered investment advisor based in Phuket Kingdom of Thailand, with over $100.15 trillion in assets under management. Aura Solution Company Limited is global investments companies dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. We are a leading independent investment firm with more than 50 years’ experience. As long-term investors we aim to direct capital to the real economy in a manner that improves the state of the planet. We do this by building responsible partnerships with our clients and the companies in which we invest. Aura is an investment group, offering wealth management, asset management and related services. We do not engage in investment banking, nor do we extend commercial loans.
What does "AURA" stand for?
Aura Solution Company Limited
How big is Aura?
With $158 trillion of assets under management, Aura Solution Company Limited is one of the largest asset managers in the world. The company primarily generates revenue through investment services, including asset and issuer servicing, treasury services, clearance and collateral management, and asset and wealth management.
What does Aura do?
Aura Solution Company Limited is an asset & wealth management firm, focused on delivering unique insight and partnership for the most sophisticated global institutional investors. Our investment process is driven by a tireless pursuit to understand how the world’s markets and economies work — using cutting edge technology to validate and execute on timeless and universal investment principles. Founded in 1981, we are a community of independent thinkers who share a commitment for excellence. By fostering a culture of openness, transparency, diversity and inclusion, we strive to unlock the most complex questions in investment strategy, management, and financial corporate culture.
Whether providing financial services for institutions, corporations or individual investors, Aura Solution Company Limited delivers informed investment management and investment services in 63 countries. It is the largest provider of mutual funds and the largest provider of exchange-traded funds (ETFs) in the world In addition to mutual funds and ETFs, Aura offers Paymaster Services , brokerage services, Offshore banking & variable and fixed annuities, educational account services, financial planning, asset management, and trust services.
Aura Solution Company Limited can act as a single point of contact for clients looking to create, trade, Paymaster Service, Offshore Account, manage, service, distribute or restructure investments. Aura is the corporate brand of Aura Solution Company Limited.
Aura Services
PAYMASTER : Paymaster is a cash account a business relies on to pay for small, routine expenses. Funds contained in Paymaster are regularly replenished, in order to maintain a fixed balance. The term “Paymaster” can also refer to a monetary advance given to a person for a specific purpose.
LEARN : https://www.aura.co.th/paymaster
APPLY : https://www.aura.co.th/paymaster-form
OFFSHORE BANKING : A bank is a financial institution licensed to receive deposits and make loans. Banks may also provide financial services such as wealth management, currency exchange, and safe deposit boxes. There are several different kinds of banks including retail banks, commercial or corporate banks, and investment banks. In most countries, banks are regulated by the national government or central bank.
LEARN : https://www.aura.co.th/offshorebanking
CASH FUND RECEIVER : Wire transfer, bank transfer or credit transfer, is a method of electronic funds transfer from one person or entity to another. A wire transfer can be made from one bank account to another bank account.
LEARN : https://www.aura.co.th/cash-fund-receiver
ASSET MANAGEMENT : Emerging Asia's stocks and bonds have experienced a lost decade. Over the past 10 years, their returns have lagged those of global indices by a considerable margin. And that is despite the fact that these economies accounted for about 70 per cent of world GDP growth over the period. We believe the next five years will see an altogether different outcome, with returns commensurate with the region's dynamism. This means Asian assets are currently under-represented in global portfolios.
LEARN : https://www.aura.co.th/am
How to reach Aura ?
Website : https://www.aura.co.th/
About us : https://www.aura.co.th/aboutus
Our Services : https://www.aura.co.th/ourservices
Latest News : https://www.aura.co.th/news
Contact us : https://www.aura.co.th/contact
Who to contact in Aura ?
TURKEY
KAAN EROZ
Managing Director
Aura Solution Company Limited
E : kaan@aura.co.th
P : +90 532 781 00 86
NETHERLAND
S.E.DEZFOULI
Managing Director
Aura Solution Company Limited
P : +31 6542 53096
THAILAND
AMY BROWN
Wealth ManagerAura Solution Company Limited
E : info@aura.co.thW: www.aura.co.th
P : +66 8241 88 111
P : +66 8042 12345
© 2023 Aura Solution Company Limited
This article is being provided for educational purposes only. The information contained in this article does not constitute a recommendation from any Aura Solution Company Limited entity to the recipient, and Aura Solution Company Limited is not providing any financial, economic, legal, investment, accounting, or tax advice through this article or to its recipient. Neither Aura Solution Company Limited nor any of its affiliates makes any representation or warranty, express or implied, as to the accuracy or completeness of the statements or any information contained in this article and any liability therefore (including in respect of direct, indirect, or consequential loss or damage) is expressly disclaimed. Learn More : www.aura.co.th
