(March 26): Asian equities were set to drift higher Thursday after gains for US stocks and bonds, as traders weighed the viability of US-Iran ceasefire talks.
Equity index futures for Japan and Australia rose, while those for Hong Kong were slightly lower. Contracts for US stocks were little changed after the S&P 500 advanced for a second time this week, gaining 0.5% on Wednesday, while the tech-heavy Nasdaq 100 climbed 0.7%. A gauge of US-listed Chinese companies rose 1.9%.
Treasuries were slightly higher across the curve Wednesday, with the US 10-year yield three basis points lower to 4.33%. Oil prices edged higher on Thursday after falling over 2% in the previous session, while gold and the dollar advanced.
The moves reflected a cautious optimism across global markets as US efforts to end the war gathered pace, eclipsing news that Iran rejected a truce proposal and maintained its military strikes.
“Markets are positioning for a conflict resolution, despite lingering strategic ambiguity,” said Elias Haddad at Brown Brothers Harriman & Co. “Ultimately, Iran’s response to the US de-escalation pivot will decide whether peak fear is behind us or still ahead.”
President Donald Trump has been pushing for talks with Iran in a bid to halt a conflict that’s approaching the four-week mark. The White House said the US has been in productive talks with Iran in the last three days and has compiled a plan stipulating the Islamic Republic dismantle its main nuclear facilities and use a reduced missile arsenal in self-defense only, according to people familiar with the matter.
See also: Oil falls, stocks jump on Iran de-escalation hopes
But Tehran is signaling little willingness to compromise. A move by the US to start indirect talks is illogical and not viable at this stage, semi-official Fars news agency reported.
Iran has its own conditions for a ceasefire, state-owned Press TV added, citing an unnamed senior security official. The nation wants guarantees the US and Israel won’t resume their attacks as well as reparations for damages and recognition of its authority over the Strait of Hormuz.
Concerns over the conflict have rippled across Asia. South Korea has set up an emergency task force to prepare for adverse scenarios, Japan is reviewing its supply chain for petroleum-related products and the Philippines has declared a national emergency.
See also: Stocks pare gains, oil edges up with Iran in focus
“There’s really no way to know at this point what the facts are regarding the state of negotiations, so expect more whipsaw action as things continue to progress,” said Bespoke Investment Group strategists. “While Iran still holds some cards, the chips are stacked heavily against them.”
Data set for release across Asia Thursday include producer prices in Japan, industrial production in Singapore and unemployment for Taiwan. Markets are closed in India, while Group of Seven foreign ministers meet in France through Friday.
Geopolitics is still in the driver’s seat, but the bigger story may be the stock market’s resilience, according to Mark Hackett at Nationwide.
“We haven’t seen a major drawdown, and that suggests retail investors are continuing to buy into weakness,” he said. “If tensions begin to ease, institutions may have to move quickly off the sidelines, and that could create a powerful rebound.”
Optimism over earnings may explain the S&P 500’s strength in the face of fighting in the Middle East.
Analysts estimate companies in the gauge will grow their profits by 11.9% in the three months through March, according to data compiled by Bloomberg Intelligence. That compares to a forecast of 10.9% before the war.
Corporate highlights:
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- JetBlue Airways Corp. is considering the option of selling itself to a competitor, Semafor reported, citing people familiar with the matter.
- Meta Platforms Inc. is cutting several hundred jobs as part of a restructuring effort that’s impacting several teams at the company, including sales, recruiting and the Reality Labs hardware division.
- Arm Holdings Plc, which made its name licensing technology to semiconductor makers, said it will sell its own chips for the first time — a move forecast to generate about US$15 billion annually within five years.
- Merck & Co. agreed to buy Terns Pharmaceuticals Inc. for US$6.7 billion, giving the multinational company access to a promising new leukemia treatment as it faces the patent expiration of its bestselling cancer drug.
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 7:03 a.m. Tokyo time
- Hang Seng futures fell 0.4%
- S&P/ASX 200 futures rose 0.3%
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro was unchanged at US$1.1559
- The Japanese yen was little changed at 159.46 per dollar
- The offshore yuan was little changed at 6.9032 per dollar
- The Australian dollar was little changed at US$0.6945
Cryptocurrencies
- Bitcoin rose 0.2% to US$71,102.48
- Ether was little changed at US$2,166.18
Bonds
- Australia’s 10-year yield declined one basis point to 4.95%
Commodities
- West Texas Intermediate crude rose 1% to US$91.18 a barrel
- Spot gold rose 0.2% to US$4,515.27 an ounce
Uploaded by Jason Ng
