SINGAPORE: Asian stocks made a cautious start to trading on Tuesday as uncertainty over whether the ceasefire in the Middle East conflict would hold capped the lift to sentiment from renewed optimism around AI.
MSCI's broadest index of Asia-Pacific shares outside Japan fluctuated between gains and losses as trading commenced, last 0.5% lower, led by a 2% decline for Korean shares after an initially higher open. S&P 500 e-mini futures were down 0.3%, while in Japan, the Nikkei 225 slumped 0.7%.
"Conflicting news coming out of the Middle East left markets whipsawing, with Iran stating that negotiations with the U.S. have been suspended, only for President Trump to follow up in recent hours with reassurances that talks are continuing 'at a rapid pace'," analysts from Westpac wrote in a research note. Brent crude held steady around $95 a barrel after Lebanon announced a partial ceasefire between Hezbollah and Israel on Monday, which could clear the path for renewed efforts to end the three-month war between the United States and Iran.
Oil prices settled up more than 4% on Monday after reports that Tehran had halted indirect negotiations with the U.S. Overnight, the S&P 500 closed 0.3% higher after ISM's manufacturing PMI rose to 54.0 in May from 52.7 the previous month, beating expectations to reach the highest level in four years, likely driven by businesses front-loading orders amid rising prices and shortages because of the war with Iran.
"That the equity market is in boom mode is not up for debate," despite higher energy prices and surging real interest rates, said David Rosenberg, founder and president at Rosenberg Research in Toronto, in a note to clients. "The S&P 500 is now up nine weeks in a row, a streak we last witnessed in late 2023."
AI suppliers in Asia made gains after AI developer Anthropic said it had confidentially filed for a U.S. initial public offering, which could draw a trillion-dollar valuation. Alphabet shares slipped 0.7% after the tech giant said it is looking to raise $80 billion in equity offerings, including an investment from Berkshire Hathaway, in an aggressive push to fund expansion of its AI infrastructure.
The U.S. dollar index, which measures the greenback's strength against a basket of six currencies, held steady at 99.18, firmly within the tight range it has sat in for the past three weeks.
The yield on the U.S. 10-year Treasury bond was down 2.0 basis points at 4.455%. Gold was down 0.1% at $4,479.17.
In cryptocurrencies, bitcoin was down 0.2% at $71,232.83, while ether was flat at $2,002.03. - Reuters
