Asia Stocks Edge Up as Ceasefire Boosts Confidence, Dollar Droops
By Kevin Buckland
TOKYO (Reuters) - Asian stocks ticked higher and crude oil prices hovered near multi-week lows on Wednesday, as investors interpreted the ceasefire between Israel and Iran as a green light to return to riskier assets and put aside immediate concerns about an energy shock.
The dollar remained close to an almost four-year low against the euro, with two-year U.S. Treasury yields dipping to 1-1/2-month troughs as lower oil prices reduced the risk to bonds from an inflation spike.
The shaky truce between the two countries has so far held, although Israel has said it will respond forcefully to Iranian missile strikes that came after U.S. President Donald Trump announced an end to the hostilities. In addition, U.S. airstrikes did not destroy Iran's nuclear capability and only set it back by a few months, according to a preliminary U.S. intelligence assessment, contradicting Trump's earlier comments that Iran's nuclear program had been "obliterated."
Japan's Nikkei rose 0.3%, and Australia's stock benchmark edged up 0.1%, while Taiwan's index gained 0.9%. Hong Kong's Hang Seng climbed 0.8%, and mainland Chinese blue chips added 0.5%. An MSCI index of global stocks held steady after pushing to a record high overnight.
"Despite the ceasefire between Israel and Iran appearing somewhat tenuous, the markets are shrugging it off," said Kyle Rodda, senior financial markets analyst at Capital.com. "Realistically, the markets don't care if a limited conflict comprised of mostly air strikes continues between the two countries. It's the prospect of a broader war, with deeper U.S. intervention and an Iranian blockade of the Strait of Hormuz that really matters. And for now, the risks of that seem low."
U.S. stock futures pointed slightly higher after the S&P 500 jumped more than 1% overnight. Pan-European STOXX 50 futures advanced 0.2%. Brent crude ticked up 83 cents to $67.97 per barrel, bouncing a bit following a plunge of as much as $14.58 over the previous two sessions. U.S. West Texas Intermediate crude also added 83 cents to trade at $65.20 per barrel.
The two-year U.S. Treasury yield dipped to the lowest since May 8 at 3.787%. The U.S. dollar index, which measures the currency against six major counterparts, was flat at 97.977. The euro added 0.1% to $1.1612, edging back towards the overnight high of $1.1641, a level not seen since October 2021. Gold rose 0.3% to about $3,333 per ounce.
Aside from geopolitics, U.S. monetary policy continues to dominate investor concerns. Federal Reserve Chair Jerome Powell said on Tuesday that higher tariffs could begin raising inflation this summer, a period that will be key to the U.S. central bank considering possible interest rate cuts. Data showed that U.S. consumer confidence unexpectedly deteriorated in June, signaling softening labor market conditions. Markets continue to price in a roughly 19% chance that the Fed will cut rates by a quarter point in July, according to the CME FedWatch tool.
(Reporting by Kevin Buckland; Editing by Sam Holmes)
