Asian shares enjoyed a partial rebound from the previous day’s decline as investors returned to AI trades, while easing tensions in the Middle East also provided support and pushed oil prices lower.
Gains in most stock markets followed a rebound on Wall Street fueled by a race to snap up cheaper assets after a selloff triggered by bets on a U.S. interest rate hike and warnings about technology firm valuations.
News that the US economy had created more than double the number of jobs expected in May showed it remained in poor health but put pressure on the Federal Reserve to tighten monetary policy as it also struggled with rising inflation.
That came after disappointing revenue forecasts from chip giant Broadcom had fueled concerns about the AI sector, which has helped markets hit record highs this year.
A slide in New York tech firms on Friday was followed by a similar collapse for their Asian counterparts on Monday, sending Seoul’s Kospi down more than eight percent.
However, analysts said the sell-off was largely driven by profit-taking and could be seen as a healthy pause in a rally that has been underway since March.
And on Tuesday, Asian investors tracked a bounce for the Nasdaq and the S&P 500.
Kospi rallied by more than three percent, while Taipei added almost two percent, with Tokyo, Shanghai, Singapore, Manila and Wellington also up. Hong Kong was flat and Sydney was down.
“Expectations of tighter monetary policy, combined with underwhelming results from Broadcom last week, raised questions about the pace of sector growth and prompted investors to take profits,” wrote Fiona Cincotta at City Index.
“This is by no means the end of the AI trade, but it does suggest that valuations were stretched in parts of the market.”
Investors also took heart from news that Iran and Israel said on Monday they had halted hostilities after exchanging attacks that threatened to reignite war in the Middle East.
Israeli Prime Minister Benjamin Netanyahu announced that “the fire on that front has been brought under control” hours after Tehran said it had halted its military action.
Tehran fired missiles at Israel on Sunday because of Israel’s ongoing war against Hezbollah in Lebanon. Israel then hit back, despite US President Donald Trump’s efforts to persuade Netanyahu. This prompted another round of Iranian missiles, before Tehran announced a ceasefire.
Fears had grown that the explosion would jeopardize Tehran’s cease-fire – in effect since April 8 – and derail efforts at peace talks to reopen the Strait of Hormuz, through which a fifth of global crude oil normally passes.
Oil prices, which had risen more than five percent earlier on Monday, pared earlier gains and fell on Tuesday.
Eyes are now turning to the US inflation release on Wednesday, which could play a key role in the Fed’s rate decision-making. The consumer price index is expected to reach 4.2 percent, the highest level in more than three years.
– Key figures around 0210 GMT –
Tokyo – Nikkei 225: UP 1.0 percent to 64,642.31
Hong Kong – Hang Seng Index: FLAT at 24,649.98
Shanghai – Composite: UP 0.3 percent to 3,971.53
West Texas Intermediate: DOWN 0.4 percent to $90.39 a barrel
Brent North Sea crude: DOWN 0.3 percent to $93.98 a barrel
Euro/dollar: UP to $1.1540 from $1.1531 on Monday
Pound/dollar: UP at $1.3351 from $1.3341
Dollar/yen: DOWN at 160.19 yen from 160.21 yen
Euro/pound: DOWN at 86.43 pence from 86.44 pence
New York – DOW: DOWN 0.2 percent at 50,786.01 (close)
London – FTSE 100: Up 0.1 percent to 10,373.20 (close)
