Asia shares mixed, oil eases on Trump’s Iran comments

Asian stocks wobbled on Tuesday, while bonds found their footing after a sharp selloff after US President Donald Trump’s decision to halt a planned attack on Iran and his bets about a good chance of a nuclear deal sent oil prices tumbling.

Trump said Monday he was pausing a planned attack on Iran to allow negotiations to begin on a deal to end the war after Tehran sent a new peace proposal to Washington.

He later said there was a “very good chance” the United States could reach a deal with Iran to prevent Tehran from acquiring nuclear weapons.

Still, investors remained cautious in the previous session after being shaken by a weekend drone attack in the United Arab Emirates.

“We’ve already seen a lot of back and forth,” said Fabien Yip, market analyst at IG.

“Until there is real action to ensure safe passage of ships in the Strait of Hormuz and we see a significant recovery in the number of traffic passing through the Strait, I think the market will generally shrug its shoulders at comments from both sides.”

Brent crude futures fell more than 2.0 per cent to US$109.41 ($A152.56) per barrel following Trump’s comments, while US crude fell 1.3 per cent to US$107.25 ($A149.55) per barrel, although both remained more than 50 per cent above pre-war levels.

In stock markets, MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.22 percent, while Japan’s Nikkei index rose 1.0 percent. In South Korea, the Kospi fell 2.0 percent.

Nasdaq futures reversed early gains to fall 0.07 percent, while S&P 500 futures lost 0.03 percent. In Europe, EUROSTOXX 50 futures increased by 0.4 percent, while FTSE futures and DAX futures increased by 0.3 percent and 0.4 percent, respectively.

The all-important AI trade will be tested with Nvidia earnings due Wednesday, when expectations are very high for the world’s most valuable company.

“Nvidia’s earnings are the ultimate test for a stock market that’s not only trading at record highs, but has made a breathtaking bounce off the March lows, as Nvidia is the market shorthand for all things AI, and that market’s gains have been largely driven by AI over the last few years,” said Richard Reyle, chief investment officer at Questar Capital Partners.

The drop in oil prices helped stem a sharp sell-off in global bonds on Tuesday, but concerns remained about a persistent inflationary shock caused by the Iran war.

The yield on the benchmark 10-year U.S. Treasury note fell to 4.5974 percent in early Asian trading, from the highest level in more than a year, while the two-year yield fell slightly to 4.0564 percent.

Japanese government bond yields, which reached record levels in the previous session, also fell similarly.

G7 finance ministers acknowledged growing concerns about public debt and bond market volatility as they met in Paris overnight.

Markets are pricing in interest rate hikes by major central banks this year on expectations that policymakers will have to tighten policy to combat a resurgence in inflation caused by high long-term energy prices.

“While the economic logic of pricing in persistently high inflation in the coming years due to the current supply shock is weak, especially given the labor market backdrop, the return of supply-side volatility and the optimistic growth tone in markets suggest that further risk premiums are required along the inflation curve,” Goldman Sachs analysts said in a note.

In foreign exchange, the dollar benefited from the demand for a safe haven since the beginning of the war and rose by 0.1 percent to 159 yen; This has put traders on alert for any intervention from Tokyo to support the struggling currency.

The euro fell 0.1 per cent to US$1.1643 (A$A1.6235), while the pound sterling similarly fell 0.1 per cent to US$1.3419 (A$A1.8711).

Elsewhere, spot gold fell marginally to US$4,562.50 ($A6,361.81) per ounce under pressure from rising bond yields.

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