Asia report: Most markets fall on fresh US-Iran ceasefire doubts

(Sharecast News) - Asia-Pacific markets traded mixed on Tuesday as investors cast fresh doubts over the fragile US-Iran ceasefire, after president Donald Trump warned the truce was on "massive life support".

"Risk appetite has declined as the Iran ceasefire story continues to deteriorate and Asia loses the clean AI-led bid that carried markets last week," said Patrick Munnelly, market strategy partner at TickMill.

"Brent is back around $105 per barrel, up 0.6%, after Trump described the ceasefire as being on 'massive life support', keeping the Strait of Hormuz risk premium embedded in energy prices."

Trump on Monday cast doubt on the survival of the ceasefire after Tehran delivered what he described as an unacceptable response to Washington's proposal for ending the conflict.

"I would say the ceasefire is on massive life support, where the doctor walks in and says, 'Sir, your loved one has approximately a 1% chance of living,'" he said.

Oil prices rose as uncertainty around the ceasefire persisted, with Brent crude futures last up 2.43% on ICE at $106.74 per barrel, and the NYMEX quote for West Texas Intermediate gaining 2.91% to $100.92.

Munnelly said the renewed rise in oil was "again feeding through to rates, with the 10-year Treasury yield up one basis point to 4.42%, while the dollar is firmer across G10 on haven demand and higher-for-longer inflation concerns".

"MSCI Asia Pacific fell 0.4%, European equity futures point to a weaker open, and US futures are lower after Wall Street's record close on Monday - not a disorderly unwind, but a clear test of how much geopolitical risk record markets can absorb," he added.

Tokyo in the green, rest of region falls

Japan's Nikkei 225 rose 0.52% to 62,742.57, while the broader Topix gained 0.83% to 3,872.90.

Furukawa Electric jumped 16.12%, Fujikura rose 11.59%, and Shimizu Corporation added 10.67%.

Yields on Japan's 10-year government bonds rose to 2.545%, their highest level since 1997, after minutes from the Bank of Japan showed some board members believed the central bank should raise interest rates soon.

"Japan delivered a hawkish nuance - the BoJ's April meeting summary showed some board members still open to raising rates soon despite geopolitical uncertainty," Munnelly said.

"That is relevant for global duration because the oil shock is not only a growth risk; it is also keeping inflation pressure alive."

Japan's household spending fell for a fourth straight month, underscoring the fragility of consumption even as wages continued to rise.

Inflation-adjusted household outlays dropped 2.9% year on year in March, according to the Ministry of Internal Affairs and Communications, worse than forecasts for a 1.3% decline.

Spending fell 1.3% from February on a seasonally adjusted basis.

Transportation and communications were the biggest drag, while food, utilities and clothing also weighed.

Spending on essentials such as medical care and housing increased.

In China, the Shanghai Composite fell 0.25% to 4,214.49, while the Shenzhen Component declined 0.47% to 15,824.92.

HeBei Jinniu Chemical Industry dropped 10.01%, Shanghai Jiao Yun Group lost 9.98%, and Hunan Oil Pump fell 9.84%.

Hong Kong's Hang Seng Index slipped 0.22% to 26,347.91.

Lenovo Group fell 3.43%, Wharf Real Estate Investment lost 2.77%, and Pop Mart International declined 2.69%.

South Korea's Kospi 100 fell 2.28% to 9,181.39, with Lotte Chemical down 16.34%, LG Chemicals losing 8.26%, and Samsung SDI dropping 8.04%.

"Korea was the overnight pressure point," Munnelly said.

"The Kospi dropped 3.1% after presidential policy chief Kim Yong-beom suggested the country should consider a resident dividend funded by taxes on AI-related revenues."

Munnelly said the market reaction was swift because "Korea has become one of the purest global plays on AI capex, semiconductors and memory pricing; introducing profit redistribution into that narrative forces investors to rethink the after-tax earnings upside".

"The details remain unclear, but the direction of travel matters: when AI optimism is responsible for a disproportionate share of market leadership, even tentative policy risk around AI profits can hit multiples," he added.

Sydney in the red as Australian businesses face squeeze

Turning down under, Australia's S&P/ASX 200 declined 0.36% to 8,670.70.

Life360 fell 10.89%, DroneShield lost 9.92%, and Temple & Webster Group dropped 6.01%.

Australian businesses faced a tougher operating environment in April as accelerating costs squeezed margins and forward demand weakened, according to the NAB Monthly Business Survey.

Purchase cost growth rose sharply to 4.5% in quarterly terms, outpacing final product price growth of 1.8%.

Business conditions fell for a fourth consecutive month, down three points to +3 index points, while confidence rose five points to -24.

Forward orders fell another four points, taking the decline since February to 11 points, while capital expenditure dropped eight points in its largest one-month fall since the pandemic.

"Pressure on margins is increasing, as purchase cost growth is more than 1ppt higher than prices in all industries. In manufacturing and construction margin pressure is more extreme, with purchase cost growth 3.4 percentage points and 3.8 percentage points higher than price growth, respectively," said NAB head of Australian economics Gareth Spence.

"The survey suggests that rising prices and pressure on margins are beginning to affect activity and investment measures, as forward orders, capex, cash flow and employment have all fallen noticeably in recent months and are sitting well below their respective long-run averages.

"The April survey highlights the challenges of the energy price shock for business: cost pressures rise while the outlook for future demand softens."

Across the Tasman Sea, New Zealand's S&P/NZX 50 fell 0.99% to 13,080.33.

SkyCity Entertainment Group dropped 4.76%, A2 Milk Company lost 4.35%, and Fisher & Paykel Healthcare Corporation declined 2.89%.

Dollar advances on regional peers

In currencies, the dollar was last up 0.26% on the yen to trade at JPY 157.60, as it gained 0.43% against the Aussie to AUD 1.3853, and advanced 0.38% on the Kiwi to change hands at NZD 1.6828.

Reporting by Josh White for Sharecast.com.