Asia report: Markets move lower as oil prices retreat

(Sharecast News) - Asia-Pacific markets mostly declined on Friday as cautious optimism over a fragile Middle East ceasefire tempered investor sentiment, diverging from Wall Street's record-setting rally.

"Global risk assets are pausing after a strong multi-day rally that pushed several benchmarks to record highs," noted Patrick Munnelly, market strategy partner at TickMill.

"As the weekend approaches, investors are becoming more cautious, shifting their focus back to the potential extension of the US-Iran ceasefire beyond next week.

"Overall sentiment remains constructive, but after a strong run, markets appear reluctant to take on additional risk without clearer signs that diplomacy is holding."

US president Donald Trump said the war in Iran "should be ending pretty soon," while confirming that Israel and Lebanon had agreed to a 10-day ceasefire starting at 1700 EDT.

Iran's parliament speaker indicated that a halt in Israeli attacks on Lebanon would be a key condition for restarting US-Iran negotiations.

Trump also said the next round of in-person talks with Tehran could take place "probably, maybe, next weekend," ahead of the expiry of a two-week ceasefire on 21 April.

Reflecting the broader tone, Munnelly added that "the move looks more like consolidation than the start of a broader reversal, though it does suggest that some near-term momentum is fading after investors aggressively priced out geopolitical risk over the past two weeks."

Stocks in the red across the region

In Japan, the Nikkei 225 fell 1.75% to 58,475.90, with losses led by Sumco Corporation, down 9.99%, Sumitomo Metal Mining, which dropped 7.89%, and Screen Holdings, off 6.83%.

The broader Topix declined 1.41% to 3,760.81.

Finance minister Satsuki Katayama said the Japan Bank for International Cooperation would establish an investment window of up to JPY 600bn (£2.79bn) to help Asian countries secure energy supplies, adding that oil market volatility was influencing foreign exchange markets.

Meanwhile, Bank of Japan governor Kazuo Ueda said policymakers must consider Japan's low real interest rates when setting monetary policy.

Munnelly said the decline followed recent strength, noting that "in Japan, the Nikkei 225 reached another record high on Thursday but is down 1% this morning, reflecting profit-taking after a sharp advance.

"This aligns with broader regional trading, where investors seem more focused on protecting gains over the weekend than extending exposure."

In China, the Shanghai Composite edged 0.1% lower to 4,051.43, with Shanghai Wondertek Software falling 9.89%, Jiangsu Yangnong Chemical Co down 8.35%, and Guosheng Shian Technology losing 8.14%.

The Shenzhen Component outperformed, rising 0.6% to 14,885.42.

Munnelly said weakness across the region reflected a broader recalibration in risk appetite, adding that "weakness is more pronounced in Asia, where equities are down 0.9%, while European futures also point to a softer open."

Hong Kong's Hang Seng Index declined 0.89% to 26,160.33, weighed by losses in WuXi AppTec, down 5.9%, CSPC Pharmaceutical Group, which fell 4.17%, and Sun Hung Kai Properties, off 4.04%.

South Korea's Kospi 100 slipped 0.73% to 7,156.03, with SKC dropping 6.8%, Hanwha Techwin falling 6.32%, and Samsung SDS losing 4.45%.

Markets also weaker down under

In Australia, the S&P/ASX 200 edged 0.09% lower to 8,946.90, with declines led by Stanmore Coal, down 6.8%, Temple & Webster Group, which fell 6.46%, and Summerset Group Holdings, off 5.74%.

Across the Tasman Sea, New Zealand's S&P/NZX 50 dropped 1.23% to 12,905.67, with Air New Zealand down 4.35%, Summerset Group Holdings falling 4.07%, and Ryman Healthcare losing 3.85%.

Munnelly said the easing in geopolitical tensions had driven the broader recovery in risk assets, noting that "global equities have continued to unwind the war-related risk premium built up earlier in the escalation," while adding that markets were now more exposed to headline risk.

Currencies mixed as oil prices move lower

In currency markets, the dollar was last down 0.06% on the yen to trade at JPY 159.08, as it fell 0.17% against the Aussie to AUD 1.3940, and rose 0.06% on the Kiwi to change hands at NZD 1.6985.

Cross-asset signals also pointed to a cooling in risk appetite, with Munnelly noting that "the decline in oil suggests energy markets are also removing part of the geopolitical premium, though prices remain high enough to keep inflation concerns alive."

Oil prices moved lower, with Brent crude futures last down 3.04% on ICE at $96.37 per barrel, and the NYMEX quote for West Texas Intermediate falling 3.76% to $91.13, as traders weighed the potential for easing geopolitical tensions.

Looking ahead, Munnelly said "the main question is whether the current situation is just a healthy pause after an overstretched rally or the start of a deeper pullback if ceasefire talks fail," adding that "for now, the evidence still favours consolidation over reversal."

Reporting by Josh White for Sharecast.com.