In Thursday's trading session, Asian stock markets experienced slight gains in a session that saw mixed results, while the U.S. dollar saw a pause in its recent rally, and stability returned to the bond markets as investors re-evaluated the future direction of interest rates.
Following a significant drop due to concerns over demand and the absence of a clear response from Israel or the United States to Iran's recent attack, oil prices began to stabilize.
Despite expectations that there won't be severe new sanctions imposed on Iranian oil, the U.S. is poised to reintroduce oil sanctions on Venezuela, which has helped Brent crude futures to stabilize at $87.37 a barrel after experiencing a $2.70 drop the previous day.
The MSCI index of Asia-Pacific shares outside Japan saw a modest increase of 0.4%, although market movements varied across the region, with South Korea and Australia posting gains, while other areas saw declines. Japan's Nikkei index fell by 0.4%, heading towards its largest weekly loss since December 2022.
Following a downturn in Wall Street indices, S&P 500 futures remained steady in early Asian trade. The dollar experienced a slight decrease overnight after an announcement of a trilateral agreement among the U.S., Japan, and Korea to closely consult on foreign exchange issues, hinting at possible interventions to curb the dollar's rise in Asia.
Expectations for short-term U.S. interest rates saw little change, but the selling pressure on longer-dated bonds eased, leading to a decrease in 10-year U.S. Treasury yields by 7.2 basis points to 4.59%, with two-year yields also retreating after reaching 5%.
Market analysts, including Anshul Sidher from ANZ, view these movements as minor corrections following extended trends, with a close eye kept on bonds and the dollar for future market direction. The oil market is expected to remain within a certain range, barring any major escalations in the Middle East.
The Australian stock market is on the verge of breaking a five-day losing streak, with the ASX 200 index up by 0.5% just before noon in Sydney. Market focus is shifting towards earnings reports, notably from Taiwan Semiconductor Manufacturing Co (TSMC, Financial), which saw a 1% drop in early trading.
Amid a week characterized by bond sell-offs and robust dollar buying, driven by persistent U.S. inflation and a change in the Federal Reserve's tone, the rates-sensitive Nasdaq is down by 3%.
The euro faces pressure as European policymakers prepare to cut rates in two months, though it has recovered slightly from this week's five-month lows. The Australian dollar also saw a slight dip following unexpected job losses in March.
The yen is trading close to a three-decade low against the dollar, with market participants watching for potential interventions if it breaches 155. Meanwhile, China's yuan remains weak against the dollar, a trend that Chinese authorities seem willing to accept for now.
In the commodities market, European gas prices have pulled back from three-month highs, and while metal prices have paused, they have not reversed their gains. Copper and iron ore prices remain strong, and gold is trading just below last week's record high.
Later today, speeches from U.S. and European central bankers, U.S. jobless claims data, and earnings reports from Blackstone and Netflix will be in focus.
