Asia report: Nikkei hits fresh record as most regional markets rise

(Sharecast News) - Asia-Pacific markets mostly rose on Wednesday, with Japan's Nikkei 225 hitting a record high, as investors looked past uncertainty over US-Iran negotiations aimed at ending the Middle East conflict.

"Overnight news has delivered several macro cross-currents, but the broad message is that markets are again being asked to look through a more complicated inflation backdrop," said Patrick Munnelly, market strategy partner at TickMill.

"Drone and missile attacks have been reported across the Middle East, with Iran targeting countries including Bahrain and Kuwait, while the US struck an IRGC control centre on Qeshm Island."

Tensions between Washington and Tehran remained elevated after US secretary of state Marco Rubio said Iran had mined "large segments" of the Strait of Hormuz.

"They're firing on commercial ships and they've mined large segments of Hormuz - international waters," Rubio told the Senate Foreign Relations Committee, in his first appearance before Congress since the Iran war began on 28 February.

A White House official told CNBC that the Pentagon had destroyed numerous mines and more than 40 minelaying vessels.

Around 20% of the world's oil supplies passed through the Strait of Hormuz before the war, making the waterway critical to global energy markets.

Oil prices rose during Asian trading, with Brent crude futures last up 2.17% on ICE at $98.08 per barrel, and the NYMEX quote for West Texas Intermediate gaining 2.39% to $96.00.

"Brent is now above yesterday's range at around $97 per barrel, showing that the oil market is still quick to price renewed escalation even if equities remain more focused on AI and tech momentum," Munnelly said.

Tokyo benchmark hit record high as most regional markets rise

Japan's Nikkei 225 rose 2.5% to a record 68,402.13, while the broader Topix gained 1.83% to 3,996.20.

Screen Holdings jumped 17.94%, Tokyo Electron gained 13.39%, and Nikon rose 9.79%.

"The resilience in equities is notable but not especially surprising," Munnelly said.

"The AI trade continues to provide a powerful offset to geopolitical stress, especially after the latest Asian tech momentum and stronger China services data."

In China, the Shanghai Composite added 0.22% to 4,083.97, while the Shenzhen Component rose 0.73% to 15,704.71.

Suzhou TZTEK Technology climbed 13.8%, Henan Rebecca Hair Products gained 10.08%, and Datang Telecom Technology added 10.06%.

China's RatingDog general services PMI rose to 54.4 in May from 52.6 in April, beating forecasts for 52.3 and marking the strongest services-sector growth since February.

New orders increased at the fastest pace in three months, export orders returned to growth after two months of slight declines, and employment rose for the first time in four months.

Business confidence also improved to a three-month high, supported by better market conditions, stronger demand, new projects and new business lines.

"RatingDog's May services PMI rose to 54.4, more than two points above expectations, though some of that may reflect a holiday-season boost," Munnelly said.

"Still, for markets looking for confirmation that the global growth pulse is not rolling over, the China data help.

"The problem is that better growth alongside higher oil is not an easing story; it is more likely to reinforce the idea that central banks can stay cautious."

Hong Kong's Hang Seng Index fell 1.56% to 25,633.21.

Meituan dropped 5.96% and China Resources Mixc Lifestyle lost 4.6%, while WuXi Biologics rose 7%.

South Korean markets were closed for Local Election Day.

Sydney bourse rises despite slower GDP growth

Turning down under, Australia's S&P/ASX 200 rose 0.7% to 8,785.70.

Paladin Energy jumped 11.48%, Tuas gained 10.5%, and Megaport added 7.02%.

Australia's economy expanded 0.3% quarter on quarter in the first quarter, below expectations for 0.5% growth and slower than the 0.9% expansion recorded in the fourth quarter.

Annual growth eased to 2.5% from 2.6%.

Net trade subtracted 0.8 percentage points from growth, with exports down 1.1% on weaker coal and iron ore shipments and imports up 2.1%.

Domestic demand contributed 1.0 percentage point, led by private investment and household consumption.

Machinery and equipment investment surged 16.3%, driven by spending on data centres, while public investment rose 0.9% on higher defence and infrastructure outlays.

Government consumption fell 0.2% after the expiry of energy bill relief measures.

"Australia's first-quarter GDP disappointed slightly at 0.3% q/q, below market and RBA expectations," Munnelly said.

"There may be some weather-related give-back in the second quarter, so the miss is not necessarily decisive, but it does highlight the challenge facing central banks outside the US - growth is not uniformly strong, yet imported inflation pressure from energy and FX remains persistent.

"That creates the same uncomfortable trade-off seen across several economies," he added.

Australia's industry index slipped 1.0 point to -26.5 in May, signalling persistent industrial weakness.

New orders fell 6.3 points to -34.6, input volumes dropped 5.5 points, and activity and sales remained weak at -32.6.

Employment stayed in contraction at -14.6, while input prices eased to 63.1 and sales prices slipped to 18.3, leaving margins under pressure.

Wages rose to 43.6 and capacity utilisation fell to 75.7%, with energy costs, raw material shortages and regulatory hurdles continuing to weigh on conditions.

Across the Tasman Sea, New Zealand's S&P/NZX 50 fell 0.42% to 13,115.08.

Vista Group International dropped 7.38%, KMD Brands lost 6.1%, and Mainfreight declined 3.48%.

Yen strengthens on dollar

In currencies, the dollar was last down 0.11% on the yen to trade at JPY 159.73, as it rose 0.3% against the Aussie to AUD 1.3969, and gained 0.47% on the Kiwi to change hands at NZD 1.6959.

Munnelly said Japan remained "another pressure point," with dollar-yen back around 160 and finance minister Katayama reiterating that the government was ready to respond to foreign exchange moves at any time.

"Intervention risk is therefore rising again, but the main driver remains the same: wide rate differentials and uncertainty over the BoJ's willingness to tighten, even as domestic inflation signals have softened," he said.

"Verbal intervention can slow the move, but without a shift in rates or a decisive FX operation, the market will continue to test official tolerance."

Reporting by Josh White for Sharecast.com.