Asian stocks gain, oil dips on hopes of new round of US-Iran talks
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ASIAN stocks edged higher as signs Iran may join talks with the US fostered cautious optimism about progress in the Middle East ahead of a looming ceasefire deadline. Oil dropped.
The MSCI Asia Pacific Index climbed 0.3 per cent, with advancers and decliners evenly matched in the gauge. The Kospi Index in South Korea – the world’s best-performing gauge over the past year – rose 2 per cent to a record with chip stocks gaining as the artificial intelligence trade regained momentum. Apple shares slipped in late US trading after naming John Ternus its next CEO.
Global crude benchmark Brent fell 0.7 per cent to US$94.80 a barrel early on Tuesday (Apr 21) as signs Iran may join negotiations with the US before the two-week ceasefire deadline lifted the mood. That is well below March’s peak of nearly US$120 a barrel. Treasuries steadied and the US dollar was little changed.
Attention is shifting to whether the US and Iran can resume negotiations in Pakistan to calm strains and reopen the Strait of Hormuz after an initial round in Islamabad ended without a deal. The US dollar has weakened over the past three weeks and several equity gauges have recouped war-related losses as markets price in easing tensions, cheaper oil and stronger economic growth.
“Going into peace talks is clearly a positive sign that we are going to have some kind of resolution,” said Noriko Chen, a portfolio manager for equities at Capital Group. “While we expect inflation to be running a little bit higher than we have seen in the recent past, we don’t think it will end up having a big impact on the global economy.”
US President Donald Trump said he is unlikely to extend the truce with Iran if no agreement is reached before its expiry on Wednesday evening, Washington time.
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Transits through Hormuz have reduced to a trickle as Iran tightens control in retaliation for strikes. On Friday, that paralysis appeared to end, with Teheran saying it would reopen the waterway, before reversing course during the weekend as the US maintained a naval blockade and attacked an Iranian ship.
In other corners of the market, gold was steady around US$4,820 an ounce. S&P 500 contracts also edged higher in early trading after the index slipped 0.2 per cent on Monday from a record, weighed down by declines in several technology heavyweights.
The Philadelphia Semiconductor Index advanced, notching a 14th straight session in the green – a winning streak that it has exceeded just once, in 2014.
“There is the ‘POTUS put’, which seems to be far more important to investors than any ‘Fed put’,” wrote Kristina Hooper, chief market strategist at Man Group, referring to the acronym for President of the United States. “Many equity investors seem to believe the current US president is the greatest ally of the stock market and would do “whatever it takes” – to quote former ECB president Mario Draghi – to keep stocks moving higher.”
“The deadline for a US-Iran ceasefire is nearing, with only a slim chance of an extension as the Strait of Hormuz is closed, but that ’s no problem for Asian investors extrapolating into a future of blue skies for equities,” said Bloomberg’s Markets Live strategist Mark Cranfield. “However, the spectre of stagflation is creeping into the market’s narrative and set to deepen in the weeks ahead.”
This week’s US marquee economic report is also due on Tuesday. Analysts project a jump in overall retail sales for March. Excluding gasoline and autos, the data could signal more tepid demand as high fuel costs prompted budget-constrained consumers to squeeze spending on other things.
While investors remain focused on developments in the Middle East, attention may also turn to Kevin Warsh, President Donald Trump’s nominee to lead the US Federal Reserve. Warsh is scheduled to testify before the Senate Banking Committee at 10 am Tuesday, local time.
“I believe that monetary policy independence is earned – and better policy decisions crafted – by steering clear of distractions,” according to a copy of his prepared remarks viewed by Bloomberg. “I am committed to ensuring that the conduct of monetary policy remains strictly independent.” BLOOMBERG
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