Asia report: Markets mixed as oil prices rise again

(Sharecast News) - Asia-Pacific markets traded higher on Friday as investors assessed diplomacy around a potential US-Iran peace deal, while gains on Wall Street also supported sentiment after the Dow Jones Industrial Average rose to a record close overnight.

"Asian equities are finishing the week on a stronger footing as investors look beyond the narrowest AI winners and rotate into a broader set of beneficiaries," said Patrick Munnelly, market strategy partner at TickMill.

"MSCI Asia gained 1%, with Japan's Nikkei up 2.7% and again leading the region."

Oil prices advanced, with Brent crude futures last up 2.13% on ICE at $104.77 a barrel, and the NYMEX quote for West Texas Intermediate rising 1.48% to $97.78.

"The tone is constructive: investors are still willing to pay for companies that can credibly attach themselves to the AI capex cycle," Munnelly said.

"But the macro backdrop is not clean.

"Brent has moved back above $104 per barrel after a three-day decline, as Iranian comments on uranium and the Strait of Hormuz cooled optimism over US-Iran negotiations."

Munnelly said gold was softer near $4,530 an ounce, suggesting markets were "not in outright panic mode", but added that "oil's resilience matters more for central banks and consumers".

Stocks mixed across Asia

Japan's Nikkei 225 climbed 2.68% to 63,339.07, while the broader Topix rose 1% to 3,892.46.

SoftBank Group gained 11.89%, Taiyo Yuden rose 11.75%, and Sumitomo Electric added 10.16%.

"SoftBank surged 11% in Tokyo, tracking strength in Arm Holdings and renewed enthusiasm around AI infrastructure exposure," Munnelly said.

Japan's core inflation eased more than expected in April to its lowest level since March 2022, weakening the case for an early Bank of Japan rate hike.

Core inflation, which excludes fresh food prices, came in at 1.4%, below the 1.7% expected by economists polled by Reuters and down from 1.8% in March.

"The yen remains close to 159 against the dollar, its weakest since April 30, after Japan's key inflation gauge fell more than expected," Munnelly said.

"That soft inflation print complicates the BoJ's June hike debate, even though stronger equities and external demand have recently encouraged speculation that policy normalisation could resume."

In China, the Shanghai Composite rose 0.87% to 4,112.90, while the Shenzhen Component advanced 2.3% to 15,597.30.

Guangzhou Fangbang Electronics jumped 20%, Fujian Forecam Optics gained 19.26%, and Beijing Worldia Diamond Tools added 11.51%.

Hong Kong's Hang Seng Index rose 0.86% to 25,606.03.

Lenovo Group surged 19.77%, SMIC gained 7.61%, and Sunny Optical Technology Group advanced 6.78%.

South Korea's Kospi 100 was almost flat, slipping 0.01% to 9,537.87.

LG Corporation fell 3.66%, Hanmi Semiconductor lost 3.61%, and Hyundai Mobis declined 3.58%.

South Korea's composite consumer sentiment index rose by 6.9 points to 106.1 in May, as households became more optimistic about economic conditions and income prospects.

Sentiment on current living standards rose to 93 from 91, while expectations for future living standards increased five points to 97.

Expectations for future household income edged up to 100, and future household spending rose to 110.

Confidence in current domestic economic conditions jumped 15 points to 83, while expectations for future economic conditions rose 14 points to 93.

Inflation expectations were stable, with one-year ahead expected inflation at 2.8% and three-year and five-year expectations both at 2.6%.

Markets in the green down under

Australia's S&P/ASX 200 rose 0.41% to 8,657.00.

Guzman Y Gomez gained 9.57%, Paladin Energy rose 5.93%, and South32 added 5.07%.

Across the Tasman Sea, New Zealand's S&P/NZX 50 climbed 0.88% to 12,991.31.

Oceania Healthcare jumped 9.23%, Tourism Holdings gained 8.96%, and Ryman Healthcare rose 6.34%.

Dollar stronger on its regional peers

In currencies, the dollar rose 0.1% against the yen to JPY 159.14, gained 0.4% on the Aussie to AUD 1.4042, and advanced 0.38% against the Kiwi to NZD 1.7087.

"Globally, the oil shock remains the key swing factor," Munnelly said.

"Next Friday marks the 90th day of the US-Iran war, and the market's earlier comfort from surplus crude, Russian oil flows, weaker demand and higher US output is fading."

Munnelly said a deal deadline was approaching, but investor confidence in a clean resolution remained limited.]

"The longer the conflict drags on, the more oil moves from a geopolitical risk premium into realised inflation data," he said.

"That matters for the Fed."

"AI is still strong enough to lift Asia and broaden the equity rally, but oil is still strong enough to keep central banks cautious, consumers squeezed and fiscal risks alive," Munnelly added.

"The market can enjoy the tech rebound, but it cannot ignore the macro heat."

Reporting by Josh White for Sharecast.com.