Oil Drops, Asia Stocks Gain as Iran Talks Progress: Markets Wrap
(Bloomberg) — Oil gave up early gains and Asian stocks climbed as investors welcomed signs of progress in diplomatic talks between the US and Iran.
A rally in technology shares helped lift the MSCI Asia Pacific Index up 1%, while S&P 500 futures pared an early decline to trade 0.4% lower. Gold prices rebounded and Brent crude slid 1.3% to $79.50 a barrel as the US and Iran agreed to a roadmap toward reaching a final peace deal within 60 days. Treasuries dropped as cash trading resumed after Friday’s US holiday.
“Encouraging progress has been made including the creation of a mechanism for further technical talks,” mediators Qatar and Pakistan said in a joint statement. The sides also established a communication line to avoid incidents and miscalculation, with the aim of ensuring safe passage for commercial vessels through the Strait of Hormuz.
“Asian markets are moving ahead of the deal, not waiting for the deal,” said Hebe Chen, a senior market analyst at Vantage Global Prime in Sydney. “The US-Iran roadmap is still only tentative, but investors are treating it as a stepping stone toward lower oil risk, softer inflation pressure, and a cleaner path back into growth and technology shares.”
The latest developments came after talks got off to a confusing start on Sunday, when local media reported that Iran halted the discussions after US President Donald Trump once again threatened strikes if Hezbollah keeps attacking Israel. The two sides have agreed to create a “de-confliction cell” involving the parties and Lebanon to help ensure adherence to the cessation of military operations there, the mediators said.
Tech-heavy markets of Taiwan and South Korea were among the top performers in Asia once again on Monday amid continued optimism over the artificial intelligence trade. A subgauge of regional technology shares rallied more than 2.5%. Nasdaq 100 futures were down 0.4% after sliding more than 1% earlier.
Buying of AI and semiconductor shares also pushed benchmark indexes higher in Japan. In Seoul, shares of companies part of the LG Group rallied following a report that executives from the firms will visit Nvidia headquarters on Monday to discuss cooperation in physical AI and robotics. LG Electronics Inc.’s stock soared over 12%.
“Asia is at a very significant position in the AI trade or the AI chip supply chain,” Dilin Wu, a strategist at Pepperstone Group, said on Bloomberg Television. “The market sees the Iran agreement as fragile but not fragile enough to trigger an aggressive repricing of geopolitical risks at this stage.”
Meanwhile, a gauge of Chinese stocks in Hong Kong edged toward a bear market as trading resumed after a holiday, weighed down by weak consumption data. The Hang Seng China Enterprises Index dropped more than 2%, taking its decline from an Oct. 2 high to nearly 20%. The MSCI China Index was also set to enter a bear market.
In fixed-income, the yield on 10-year Treasuries rose. Bond traders, recently forced to reposition for the possibility of higher interest rates ahead, are looking to this week’s personal spending data for an early read on whether the market’s newly hawkish stance is warranted.
What Bloomberg Strategists Say:
“Government bonds will extend declines as lingering inflation risks force central banks toward hawkish policy. The potential that oil will rebound on fractious US-Iran negotiations also adds to the downside for fixed-income assets.”
— Garfield Reynolds, MLIV Asia Team Leader. Click here for the full analysis.
A gauge of the dollar advanced 0.1%, adding to last week’s gains. The pound traded near this year’s low on expectations Keir Starmer will set out a timetable for his departure as UK prime minister in coming days.
Starmer is expected to concede power in a statement as soon as Monday, people familiar with the matter said, although they cautioned that was not certain. The prime minister spent the last three days considering his position and whether he should continue to fight attempts by Greater Manchester Mayor Andy Burnham, who was elected to Parliament last week, to depose him.
The question for investors is the impact on UK’s finances if Burnham becomes prime minister. He has so far offered little clarity on the potential policies he’d pursue, making it difficult to gauge the ramifications for future borrowing. Markets are nervous about any potential to ramp up bond sales to fund spending, given the UK is already struggling with its debt pile.
“A loosening in fiscal rules would likely be poorly received by the UK bond market and weigh on GBP/USD,” Commonwealth Bank of Australia strategists including Kristina Clifton wrote in a note to clients. “The next level of support for GBP/USD is a long way away at 1.3010, its one-year low.”
Corporate Highlights:
Hong Kong is in talks with Chinese authorities to expand cross-border investment channels and grant mainland buyers access to local initial public offerings, following a regulatory crackdown on illicit offshore capital flows, according to Financial Secretary Paul Chan. Biing-seng Wu has spent most of his career developing tiny chips that tell pixels on flat-screen displays how and when to light up. Twenty-five years ago, he teamed up with his brother Jordan Wu to develop such chips for screens. Today, products from their company, Himax Technologies Inc., can be found in everything from Lamborghinis to smartwatches, and have turned the duo into billionaires. Valerie Baudson couldn’t be swayed. The chief executive officer of Amundi SA, Europe’s largest asset manager, had been looking at Axa SA’s fund unit for about a year, but the economics just didn’t make sense. With talks at a standstill, cross-town rival BNP Paribas SA seized the opportunity, buying Axa Investment Managers to more than double the money it oversees and create a major competitor in Amundi’s backyard. WiseTech Global Ltd. shares tumbled after media reports that the company’s billionaire chairman, Richard White, is being investigated by police over allegations he took advantage of a woman’s immigration status for sex and gave incorrect information for a visa application. Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.4% as of 12:39 p.m. Tokyo time Japan’s Topix rose 1.4% Australia’s S&P/ASX 200 was little changed Hong Kong’s Hang Seng fell 1% The Shanghai Composite rose 0.2% Euro Stoxx 50 futures fell 0.3% Currencies
The Bloomberg Dollar Spot Index rose 0.1% The euro was little changed at $1.1460 The Japanese yen fell 0.2% to 161.58 per dollar The offshore yuan was little changed at 6.7791 per dollar Cryptocurrencies
Bitcoin rose 0.6% to $64,171.07 Ether rose 1% to $1,735.81 Bonds
The yield on 10-year Treasuries advanced three basis points to 4.48% Japan’s 10-year yield advanced 1.5 basis points to 2.660% Australia’s 10-year yield was little changed at 4.82% Commodities
West Texas Intermediate crude was little changed Spot gold rose 0.5% to $4,176.99 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Matthew Burgess, Abhishek Vishnoi and Momoka Yokoyama.
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