(May 6): Stocks in Asia are set to follow Wall Street higher, while oil steadied after its biggest drop in two weeks, as signs that a ceasefire in the Middle East is holding eased fears of a broader conflict that could threaten the global economy.
Equity futures indicated gains in Sydney and Hong Kong on Wednesday, with Tokyo closed for a holiday. Futures for the S&P 500 edged higher in early trading after the US benchmark rose to a record on Tuesday. Washington played down the prospect of an active conflict with Tehran a day after an escalation of hostilities over the Strait of Hormuz.
Crude prices remain elevated amid a blockade of the key energy chokepoint, with West Texas Intermediate holding above US$102 a barrel in early trading on Wednesday, after an industry report indicated another big drawdown in US stockpiles. A dollar gauge was little changed and Treasury yields declined.
US Defense Secretary Pete Hegseth said the truce with Iran that began about a month ago is still holding, while Secretary of State Marco Rubio said that offensive operations are over as Washington shifts to protecting shipping in the strait.
“Operation Epic Fury is concluded,” Rubio told reporters at the White House Tuesday, 66 days after the US and Israel began bombing Iran. “We achieved the objectives of that operation.”
A rally in tech also buoyed the market on Tuesday, with a key gauge of chipmakers climbing to a record. Apple Inc is weighing using Intel Corp and Samsung Electronics Co to build the main processors for its devices in the US. In late hours, Advanced Micro Devices Inc gave a solid outlook.
See also: Asian stocks decline, led by Korea, oil climbs
The lack of further escalation in tensions with Iran is supporting investor sentiment, according to Brock Weimer at Edward Jones.
“Our base-case for markets and the economy has been that there will be a near-term resolution between the US and Iran, allowing for energy prices to fall after the Strait of Hormuz is reopened,” said Chris Senyek at Wolfe Research.
The rebound in global stocks from their Iran war lows has been so narrow that the market is primed for broader gains triggered by even slightly positive news, according to strategists at JPMorgan Chase & Co led by Mislav Matejka.
See also: Oil climbs as US-Iran deadlock lifts bond yields
“Many investors are trying to read the tea leaves on the next shoe to drop with the Iran war and oil prices, but stocks have historically moved on quickly from geopolitical events, and we believe this current issue is no different,” said Julian Koski at New Age Alpha.
On the economic front, US job openings were little changed in March while hiring rebounded as the labour market showed continued signs of stabilisation. Separate figures showed a pickup in new-home sales. The services expansion cooled in April as orders growth slowed.
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