Asian Stocks Tepid In Holiday Trading, Oil Gains On Iran: Markets Wrap

Crude oil rose, with traders pricing in heightened geopolitical risk after Iran conducted naval exercises near a critical shipping corridor before talks with the US resume later Tuesday.

Oil advanced from Friday's close, with West Texas Intermediate trading near $64 a barrel, with no settlement on Monday because of a US holiday. Brent rose more than 1% on Monday to close below $69. President Donald Trump said he will be indirectly involved in the talks. Iran wants to make a deal, he said.

Asian stocks posted a modest gain on Tuesday as holiday-thinned trading kept volumes light, with investors looking ahead to a fresh batch of economic data later this week for direction.

Mainland China and Hong Kong are shut for Lunar New Year holidays and US markets will return Tuesday after observing the Presidents' Day holiday on Monday. The yen fluctuated. 

The US rate path remains in focus following the slower-than-expected inflation print on Friday as traders fully priced a Fed cut in July and the strong chance of a move in June. Investors are also paying attention to the shifts in sentiment around artificial intelligence, which may reverberate far beyond the technology sector with the emergence of the so-called AI scare trade.

“The backdrop for equities is positive post CPI,” said Andrea Gabellone, head of global equities at KBC Securities. At the same time, there could be “more dispersion ahead as sentiment around key AI-exposed sectors is still very critical,” he added.

In the US on Tuesday, Fed Governor Michael Barr will speak on the labor market and AI, while San Francisco Fed President Mary Daly speaks on AI and the economy. Traders will also be watching for ADP private payrolls numbers on Tuesday and the minutes from the Fed's January meeting on Wednesday for a fresh read on the economy.

Cash trading in Treasuries resumed Tuesday after bonds rallied on Friday in reaction to the benign US inflation data.

Treasury two-year yields were little changed after closing at the lowest level since 2022 on Friday. That came as traders priced in higher chances the Fed will slash rates more than twice this year. Yields on the benchmark 10-year stood at 4.04%.

In Japan, the central bank governor said Prime Minister Sanae Takaichi made no specific requests during a regular meeting to discuss the economy and swap general ideas. 

Investors and economists are trying to gauge whether an emboldened Takaichi will try to slow down the central bank's path of interest hikes to protect economic growth or if she will instead encourage the BOJ to act to help support the yen.

What Bloomberg's Strategists Say...

Tuesday's 5-year JGB auction is set for a smooth outcome after BOJ Governor Ueda's meeting with Prime Minister Takaichi passed off without overt market signals. Indeed, no specific requests were made by the PM, which suggests the BOJ's gradual path of policy normalization will continue.

— Mark Cranfield, Markets Live strategist. For more on the analysis, read here.

Meanwhile, the impact of AI, which has driven selling pressure across multiple stock-market sectors in recent weeks, continued to draw attention.

A JPMorgan Chase & Co. team led by Mislav Matejka urged caution on stocks at risk of AI-driven “cannibalization” including software, business services and media companies. 

Firms are developing tools to capitalize on the divergence. Goldman Sachs Group Inc. launched a new basket of software stocks that goes long firms that will benefit from AI adoption, while shorting the companies whose workflows could be replaced. 

With AI disruption rippling through markets, a lot will come down to earnings resilience, in particular in the US. 

“When you look at the current earnings season, the companies are showing 13% of growth,” Nataliia Lipikhina, head of EMEA equity strategy at JPMorgan, told Bloomberg TV. “Overall, this is the reason why we continue to be positive on the S&P.”

Corporate Highlights:

• BHP Group's shares soared after the company said earnings for the six months to the end of December rose by more than a fifth, thanks to a surge in copper prices.
• Apple Inc. said on Monday it is holding a product launch on March 4, with the company preparing to announce several new devices in the coming weeks.
• Alibaba Group Holding Ltd. unveiled a major upgrade of its flagship AI model, accelerating a race with a panoply of startups and sectoral leaders aiming to get in ahead of Chinese sensation DeepSeek's next big platform.
• Advanced Micro Devices Inc. is partnering with Tata Consultancy Services Ltd. to deploy the US chipmaker's latest AI data center technology in India, challenging Nvidia Corp. in one of the world's fastest-growing markets.
• Hyatt Hotels Corp. Executive Chairman Tom Pritzker said he's retiring from his position at the company and won't stand for reelection to its board, citing an association with the late disgraced financier Jeffrey Epstein.

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.2% as of 9:22 a.m. Tokyo time
• Japan's Topix was little changed
• Australia's S&P/ASX 200 rose 0.4%
• Euro Stoxx 50 futures rose 0.1%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.1850
• The Japanese yen rose 0.1% to 153.24 per dollar
• The offshore yuan was little changed at 6.8852 per dollar
• The Australian dollar was little changed at $0.7074

Cryptocurrencies

• Bitcoin fell 0.2% to $68,720.85
• Ether fell 0.2% to $1,994.68

Bonds

• The yield on 10-year Treasuries was little changed at 4.04%
• Australia's 10-year yield was little changed at 4.71%

Commodities

• West Texas Intermediate crude rose 1.3% to $63.73 a barrel
• Spot gold fell 0.3% to $4,977.66 an ounce

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