Asian Stock Rally Eases As Japan Slips, Oil Falls: Markets Wrap

Asian stocks, off to their best-ever start to a year, took a breather Wednesday with Japanese equities slipping amid rising tensions with China.

The Nikkei 225 Index fell 0.4% at the open, pushing the MSCI Asia Pacific Index lower after four days of gains. The yen was a touch weaker against the dollar. Contracts also indicated a weaker open for Hong Kong stocks, after the S&P 500 Index added 0.6% to top a closing record hit in late December.

Precious metals were mixed with silver rising 1.5%, while gold edged lower. A Bloomberg gauge of the dollar held its gains from the last session. Oil extended losses after President Donald Trump said Venezuela would turn over as many as 50 million barrels of crude to the US.

Escalating tensions between Asia’s two largest economies are in focus in the region, even as optimism over artificial intelligence and expectations of Federal Reserve easing propelled US shares to a new high. Investors have largely shrugged off geopolitical risks, including those tied to Venezuela, extending a three-year bull run fueled by demand for AI-linked shares.

“The markets are alive with activity and a lot of it is quite positive,” Kyle Rodda, a senior analyst at Capital.com, wrote in a note. “Wall Street is back around record highs as optimism remains elevated about the investment landscape for the year ahead.”

China imposed controls on exports to Japan with potential military uses, escalating tensions between the two countries.

All dual-use items are banned from being exported to Japan for military use effective immediately, China’s Ministry of Commerce said in a statement Tuesday. The government’s export control list features more than 800 items, ranging from chemicals, electronics and sensors to equipment and technologies used in shipping and aerospace.

The export controls mark China’s latest move in a pressure campaign against Japan, after Sanae Takaichi became her nation’s first sitting leader to say Tokyo could deploy its military if Beijing attempted to seize self-ruled Taiwan.

Earlier, a prominent group of Japanese executives had put on hold a planned visit to Beijing.

Meanwhile, the AI theme remained in focus after a flurry of updates from tech companies at the CES trade show in Las Vegas. Gainers in the tech space on Tuesday included shares of Amazon.com Inc., Micron Technology and Microsoft Corp.

Also, Nvidia Corp., countering fears about an AI spending bubble, said on Tuesday that an upbeat revenue forecast delivered in October has only gotten brighter due to strong demand. In October, Nvidia had projected about half a trillion dollars of revenue from current and future data center chips by the end of 2026.

Investor focus this week will also turn to economic data, including business activity and jobs market reports due later in the week. A weaker-than-expected US Services PMI reading on Tuesday bolstered rate cut hopes.

“The fact that we’re getting actual real-time economic data certainly seems to be a tailwind for investors,” said Art Hogan, chief market strategist at B. Riley Wealth. “That combined with excitement coming out of CES.”

Corporate News:

• A small fleet of ships booked by Chevron Corp. is sailing to Venezuela as the company emerges as the only exporter of the country’s oil following the ouster of President Nicolas Maduro by US forces.

• BYD Co. outsold Tesla Inc. in Europe’s two largest electric-vehicle markets last year as the Chinese automaker continues its global expansion.

Stocks

• S&P 500 futures were unchanged as of 9:13 a.m. Tokyo time

• Hang Seng futures fell 0.1%

• Japan’s Topix fell 0.5%

• Australia’s S&P/ASX 200 rose 0.2%

• Euro Stoxx 50 futures rose 0.2%

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was little changed at $1.1686

• The Japanese yen was little changed at 156.80 per dollar

• The offshore yuan was little changed at 6.9825 per dollar

Cryptocurrencies

• Bitcoin rose 0.3% to $93,532.51

• Ether rose 0.4% to $3,286.47

Bonds

• The yield on 10-year Treasuries was little changed at 4.17%

• Australia’s 10-year yield declined one basis point to 4.78%

Commodities

• West Texas Intermediate crude fell 1.4% to $56.31 a barrel

• Spot gold was little changed