Asia report: Kospi reaches fresh record on mixed day for markets

(Sharecast News) - Asia-Pacific markets were mixed on Tuesday as South Korea's Kospi hit a fresh record after reopening from a public holiday, while Japanese shares pulled back after the Nikkei 225 briefly crossed 65,000 for the first time on Monday.

"Markets are starting the shortened week with a more cautious tone after US military strikes on Iranian targets knocked back optimism around a quick diplomatic settlement," said Patrick Munnelly, market strategy partner at TickMill.

"S&P 500 futures are still up 0.6%, but that is well below the strength implied by Monday's holiday rally, while Asian equities gained only 0.3% after fading from earlier highs."

Sentiment was supported by hopes of a breakthrough in US-Iran peace talks after president Donald Trump said on Monday that negotiations with Tehran were "proceeding nicely", though he warned that the US could resume attacks if talks failed.

The US Central Command also conducted "self-defense strikes" targeting Iranian missile launch sites and boats attempting to lay mines in southern Iran, underscoring the fragility of the engagement.

Former CIA director David Petraeus told CNBC that Tehran appeared to be "blinking" over the Strait of Hormuz.

"US Central Command said forces targeted missile launch sites and vessels suspected of attempting to lay mines, framing the operation as defensive, but for markets the message is straightforward: the peace trade is more fragile than Monday's price action suggested," Munnelly said.

Oil prices were mixed after Trump's comments, with Brent crude futures last up 2.92% on ICE at $98.95 per barrel, while the NYMEX quote for West Texas Intermediate fell 4.3% to $92.45.

"Oil is the clearest expression of that reassessment," Munnelly said.

"Brent has jumped 2.5% back above $98.50 barrel after falling more than 7% on Monday in thin holiday trading.

"The rebound complicates hopes for an interim deal to extend the ceasefire and reopen the Strait of Hormuz, even though Trump said talks were 'proceeding nicely' and Pakistan's military chief Asim Munir reportedly told China that an agreement was close."

Munnelly added: "Investors are still cautiously optimistic, but the risk premium has not disappeared.

"As long as military action and negotiations are running in parallel, energy markets will remain vulnerable to abrupt reversals."

Stocks mixed across Asia

Japan's Nikkei 225 slipped 0.25% to 64,996.09 after breaching 65,000 for the first time on Monday in holiday-thinned trading.

The broader Topix fell 0.1% to 3,938.46.

Archion Corporation dropped 8.68%, Chugai Pharmaceutical lost 6.54%, and Advantest declined 6.05%.

Bank of Japan deputy governor Ryozo Himino said the timing of a rate hike was still being considered as the central bank continued to monitor developments in the Middle East, according to Reuters.

In China, the Shanghai Composite fell 0.17% to 4,145.37, while the Shenzhen Component edged up 0.12% to 15,876.16.

Liaoning Hongyang Energy Resource Invest and Zhejiang Chengbang Landscape each fell more than 10%, while Beijing Hanjian Heshan Pipeline lost 10%.

Hong Kong's Hang Seng Index was nearly flat, slipping 0.03% to 25,599.45.

WH Group fell 5.11%, Contemporary Amperex Technology dropped 4.08%, and CSPC Pharmaceutical Group declined 3.25%.

South Korea led regional gains, with the Kospi 100 rising 2.91% to 9,815.47 as the wider Kospi reached a record high.

LG Innotek surged 23.61%, Samsung Electro-Mechanics gained 17.31%, and Doosan added 11.8%.

Markets diverge down under

Turning down under, Australia's S&P/ASX 200 fell 0.39% to 8,657.80.

Exchange operator ASX dropped 13.23%, while PEXA Group lost 5.92%, and Challenger declined 5.35%.

Across the Tasman Sea, New Zealand's S&P/NZX 50 rose 0.77% to 13,069.74.

Fisher & Paykel Healthcare gained 9.12%, Synlait Milk added 4.76%, and Eroad rose 4.35%.

Dollar gains on regional peers

In currencies, the dollar was last up 0.16% on the yen to trade at JPY 159.16, as it gained 0.15% against the Aussie to AUD 1.3961, and advanced 0.47% on the Kiwi to change hands at NZD 1.7109.

"Cross-asset price action reflects that tension," Munnelly said.

"The dollar is firmer against all major currencies, while gold has reversed earlier gains and fallen around 1% to roughly $4,525 per ounce, suggesting the move is less about classic safe-haven panic and more about a stronger dollar and shifting rate expectations."

Munnelly added that Treasuries had rallied across the curve as cash trading resumed after the US holiday, but government bonds in Japan and Australia had sold off, "highlighting regional differences in inflation sensitivity and central-bank reaction functions".

Reporting by Josh White for Sharecast.com.