Asia report: Markets mixed as oil prices fall back

(Sharecast News) - Asia-Pacific markets were mixed on Wednesday as investors weighed recent US military action in Iran, the fragile state of the Washington-Tehran ceasefire and hopes that a deal could still be reached, while gains in US technology stocks helped Wall Street indexes close at records.

"Global equities are still in melt-up mode as AI enthusiasm and easing geopolitical risk overpower lingering macro concerns," said Patrick Munnelly, market strategy partner at TickMill.

"The MSCI All Country World Index has reached a record high for a sixth consecutive session, while MSCI Asia gained 1.1% to an all-time peak."

US forces carried out what the Pentagon described as "self-defence" strikes in southern Iran early Tuesday, targeting missile launch sites and Iranian vessels allegedly attempting to deploy mines, even as Washington said it was still observing restraint under the ceasefire framework.

The action underscored the fragility of the truce, with both sides continuing to test limits despite talks that the White House has described as nearing completion.

US president Donald Trump said Monday that negotiations with Iran to end the war were "proceeding nicely", but warned the US could go on the offensive if talks broke down.

Oil prices fell despite the tensions, with Brent crude futures last down 3.17% on ICE at $96.42 per barrel, and the NYMEX quote for West Texas Intermediate losing 3.91% to $90.22.

"Oil is helping the risk-on tone," Munnelly said.

"Brent is down 1.6% to around $98 per barrel on optimism that the US and Iran may finalise a peace agreement, reducing the immediate inflation scare from the Strait of Hormuz disruption."

Munnelly said Treasuries were holding their gains, with the 10-year yield slightly lower at 4.47%, while the dollar was softer against most G10 currencies.

Markets mixed across region

Japan's Nikkei 225 was almost flat, edging up 0.005% to 64,999.41 after paring gains from record levels, while the broader Topix fell 0.52% to 3,918.01.

Shift rose 6.1%, Shin-Etsu Chemical gained 5.47%, and Konami Group added 5.15%.

Munnelly said dollar-yen remained near 159, "keeping intervention risk in focus, especially as the yen's weakness becomes harder to square with Japan's inflation and policy-normalisation debate".

In China, the Shanghai Composite fell 1.25% to 4,093.73, while the Shenzhen Component declined 0.88% to 15,736.47.

Hengtong Logistics dropped 10.02%, while Lotus Health Group and Luxin Venture Capital Group each lost 10.01%.

Hong Kong's Hang Seng Index fell 1.06% to 25,328.23.

CSPC Pharmaceutical Group declined 5.38%, Xiaomi lost 4.57%, and China Resources Beer dropped 4.15%.

South Korea's Kospi 100 jumped 3.26% to 10,135.70, with Samsung SDS surging 29.78%, SK Hynix rising 9.31%, and SK Square gaining 8.04%.

South Korea's manufacturing business survey index rose to 80 in May from 74 in April, marking its highest reading since August 2022.

The production index increased to 90 from 88, while new orders climbed to 87 from 85. Inventories rose to 100 from 97, the financial conditions index improved to 79 from 76, and the broader economic sentiment Index rose 5.8 points to 97.5.

"Korea remains the standout - the Kospi is now up an extraordinary 100% this year, making it the world's best-performing major index, while SK Hynix has gained more than 1,000% over 12 months and become only the third Asian company to cross a $1tn market cap," Munnelly said.

"In the US, chip leadership remains just as powerful, with Micron surging 19% and pushing its market value above $1tn," he added.

"S&P 500 and Nasdaq 100 futures point to further modest gains after Wall Street closed at records, and Europe is set to open higher."

Sydney, Wellington in the green

Turning down under, Australia's S&P/ASX 200 rose 0.69% to 8,717.70.

Megaport gained 8.63%, Austal rose 7.59%, and Infratil added 5.8%.

Australian consumer prices rose less than expected in April after a government fuel tax cut, although core inflation ticked higher as higher oil prices fed through to the wider economy.

Monthly CPI rose 0.4%, below forecasts for 0.6%, while the annual rate slowed to 4.2% from 4.6%, against expectations for 4.4%.

Trimmed mean inflation rose 0.3% on the month, in line with forecasts, lifting the annual rate to 3.4%, its highest since late 2024 and further above the Reserve Bank of Australia's 2% to 3% target band.

The softer headline inflation reading pushed the Australian dollar 0.1% lower to 71.57 US cents and three-year bond futures up five ticks to 95.49, while markets cut the implied chance of a fourth RBA rate rise in August to 40% from 51%.

The RBA had raised rates three times this year to 4.35%, fully reversing its 2025 easing, but April's unemployment rate unexpectedly climbed to a four-and-a-half-year high of 4.5%.

Automotive fuel prices fell 7% on the month after jumping 32.8% previously, following the halving of the fuel excise, while prices for postal services rose 12.4% and new dwelling construction costs gained 4.7% from a year earlier.

Across the Tasman Sea, New Zealand's S&P/NZX 50 rose 1.21% to 13,227.81.

KMD Brands jumped 13.85%, Vista Group International rose 9.13%, and Infratil gained 5.47%.

The Reserve Bank of New Zealand kept its official cash rate unchanged at 2.25% for the third consecutive meeting, narrowly opting to wait for more clarity on how the Middle East conflict would affect inflation and growth.

The decision was split three-three, with Governor Anna Breman using her casting vote to hold rates steady.

The three internal members voted to keep rates unchanged, while the three external members backed a 25-basis-point increase to 2.50%.

"The Kiwi stands out as the exception, buoyed by the RBNZ's signal that rates may need to rise," Munnelly said.

"The Committee remains focused on bringing medium-term inflation back to target and expects that OCR increases will be required this year," the RBNZ said.

It expected inflation to peak at 4.3% in the September quarter and not return to the midpoint of its target band until mid-2027.

The central bank said higher fuel prices were lifting costs, lowering business margins and reducing real incomes, while high-frequency data pointed to weak near-term demand.

It also said annual GDP growth was likely to be 0.9 percentage points lower than it assumed in February because of weaker consumption and investment.

Dollar gains on yen, Aussie

In currencies, the dollar was last up 0.06% on the yen to trade at JPY 159.39, as it gained 0.41% against the Aussie to AUD 1.4007, but fell 0.68% on the Kiwi to change hands at NZD 1.7018.

Reporting by Josh White for Sharecast.com.