AI rally pauses as Mideast ceasefire on ‘life support’
Oil rose and the dollar rose as hopes waned that a deal would be reached that would allow ships to pass through the Strait of Hormuz. Meanwhile, the hot rally in chip stocks cooled and traders awaited US inflation numbers.
US President Donald Trump said a ceasefire with Iran was on “life support” after Tehran’s response to a US offer to end the war made clear the two sides were still far apart.
Brent crude futures rose 0.7 per cent to US$105 ($A145) per barrel. S&P 500 futures fell 0.2 percent, and even the nearly unstoppable KOSPI index in Seoul fell 3.0 percent, dragging other regional markets lower.
MSCI’s broadest index of Asian shares excluding Japan fell 1.0 percent, while Tokyo’s Nikkei index was flat. European futures fell 1.0 percent.
Markets are carefully watching Trump’s visit to China on Wednesday; Expectations for progress on Iran or the trade front are low, focusing on maintaining the status quo.
“Investors shouldn’t expect sweeping deals. ‘Win’ could mean no new tariffs or export controls, and perhaps small symbolic deals like agricultural purchases, aircraft orders or signals on rare earths,” said Daniel Casali, chief investment strategist at Evelyn Partners.
“These may seem trivial, but stability at the margin is important.”
Wall Street had remained resilient in the face of rising oil prices overnight, with the S&P 500 and Nasdaq hitting the latest in a series of new closing highs.
US inflation data will be released later in the day; The headline shows that the consumer price index increased to 3.7 percent annually.
Any suggestion that the Federal Reserve might need to raise interest rates this year rather than cut them as investors expected before the war could shake markets.
Global bond yields rose overnight, led by a sell-off in gilts following Prime Minister Keir Starmer’s speech following Labor’s heavy defeat in last week’s local elections, which did little to allay investors’ doubts about his political viability.
Japan’s 10-year government bond yield rose to a 29-year high of 2.54 percent ahead of the auction to be held later in the day. The summary of views at the Bank of Japan’s April meeting reinforced the growing hawkish bias among the board and kept the door open for a rate hike in June.
Benchmark 10-year Treasury yields remained stable at 4.42 percent.
In foreign exchange trading, the dollar was at the forefront and rose to 157.53 yen. U.S. Treasury Secretary Scott Bessent is in Tokyo for talks with senior Japanese officials, but his Japanese counterpart did not publicly mention his support for Japan’s currency intervention to reporters on Tuesday.
“We agreed that we have coordinated recent market movements, including exchange rates, extremely well,” Japanese Finance Minister Satsuki Katayama said.
The euro was down 0.2 per cent to US$1.1762 ($A1.6225) and the Australian dollar was down 0.25 per cent to US$0.7232 ($A0.9976). The Australian government is set to run a narrower budget deficit than previously flagged on Tuesday.
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