Asian Markets Mixed as Oil Prices Jump Ahead of US-Iran Nuclear Talks

Financial markets across Asia showed mixed results Tuesday during holiday-shortened trading sessions. Oil prices climbed in anticipation of nuclear negotiations between the United States and Iran scheduled to begin in Geneva.

Financial markets across Asia displayed mixed performance Tuesday during trading sessions affected by holiday closures, while petroleum prices climbed ahead of scheduled nuclear discussions between the United States and Iran set to commence in Geneva.

Trading activity remained light as multiple major markets including mainland China, Hong Kong, Singapore, Taiwan and South Korea remained shuttered for Lunar New Year celebrations. American markets had also been closed Monday in observance of Presidents’ Day.

Japanese markets showed declines with the Nikkei falling 0.5% while the broader Topix index dropped 0.2% to close at 3,779.29.

Australian markets bucked the trend, with the S&P/ASX200 gaining nearly 0.5% during trading.

Bond markets saw yields decline, with ten-year Treasury yields dropping 1 basis point to 4.044% on Tuesday, reaching their lowest point since early December. Japanese five-year yields decreased 2 basis points to 1.65%, marking the lowest level since February 2.

During early Asian trading, Nasdaq futures declined 0.1% while S&P 500 futures advanced 0.2%.

The dollar index, which tracks the American currency against major trading partners, remained steady at 97.07 following a modest 0.2% gain the previous session.

Japan’s struggling economy continued drawing attention Tuesday, following disappointing economic growth data released the day before.

Officials reported Monday that Japan’s economy expanded at an annualized rate of just 0.2% during the fourth quarter, significantly below economist predictions of 1.6% growth as government expenditures weighed on economic activity. The Japanese yen gained 0.15% against the dollar Tuesday, trading at 153.28 per dollar.

These disappointing figures underscore the economic challenges facing Prime Minister Sanae Takaichi and may bolster her advocacy for more aggressive government spending measures, according to economic analysts.

The Bank of Japan’s next policy meeting is scheduled for March, with traders seeing minimal probability of an interest rate increase. Reuters polling of economists last month indicated expectations that the central bank would delay policy tightening until July.

“The market has likely assumed that softer GDP data in the fourth quarter will encourage PM Takaichi’s plans to offer additional fiscal support and reduce the sales tax on food,” NAB analysts wrote in a research note.

“Pricing for BoJ rate hikes nudged a little lower post the GDP data, with only 4 basis points priced for the March meeting and 16 basis points priced for April.”

Australia’s central bank stated Tuesday that it determined inflation would have remained persistently elevated without the interest rate increases implemented this month, though officials expressed uncertainty about whether additional tightening measures would be required.

Petroleum prices advanced ahead of US-Iran diplomatic talks designed to reduce regional tensions, occurring alongside anticipated OPEC+ production increases.

US West Texas Intermediate crude gained 1.29% while Brent crude futures climbed 1.33% overnight.

Iran’s Revolutionary Guards navy conducted military exercises in the Hormuz Strait Monday, according to the semi-official Tasnim news agency, one day before the resumption of Iran-US nuclear discussions. This strategic waterway handles approximately 20% of worldwide oil transportation.

“The market remains unsettled by geopolitical uncertainties, with investors cautious due to the pending US-Iran and Ukraine negotiations this week,” ANZ analysts said.

“Speculative positions have been increasing in recent weeks. If tension in the Middle East eases or meaningful progress is made on the Ukraine war, the risk premium currently built into oil prices could swiftly unwind.”

Gold declined 0.85% to $4949.5 per ounce as Monday’s stronger dollar made the greenback-denominated precious metal more costly for investors holding other currencies. Spot silver dropped 2%.