Japanese shares held onto gains after Donald Trump signaled he would postpone planned attacks on Iranian energy infrastructure, easing some concerns about the conflict. The broader Topix was up 1.2% as of 11:20 a.m. in Tokyo, lifted by insurers, banks and trading houses, while the Nikkei 225 rose 0.4%. Both benchmarks significantly pared gains from earlier in the morning as uncertainty around Middle East tensions weighed.
The climb snapped a two-day losing streak for Japan's equity benchmarks, which had been driven by worries that rising oil prices due to the Middle East conflict will pressure the Asian economy and corporate earnings. Oil prices dropped 10% after Trump's comments Monday but rose again Tuesday with Brent trading around $104 per barrel as of late morning in Tokyo.
“Stocks are rebounding for now on signs that the war could be nearing an end,” said Hiroyuki Ueno, chief strategist at Sumitomo Mitsui Trust Asset Management Co. “Things are unclear, but investors assume some kind of negotiations must be happening behind the scenes.”
Trump said the US has had “productive conversations” with Iran and would postpone energy infrastructure attacks for another five days, but Iran denies direct negotiations with the US. Saudi Arabia and the United Arab Emirates have taken steps toward joining the war, according to a Wall Street Journal report.
Most investors are operating on expectations that the conflict will wind down by mid-April, but if it drags on “we'll start to see more negative impacts on resources,” said Ueno. Japan's stocks will remain volatile as its market is very sensitive to oil price movements, he added.
Insurers performed especially strongly Tuesday, with a Topix index of such stocks gaining as much as 8.6%, the most since April. The climb comes after insurer Tokio Marine Holdings announced Berkshire Hathaway Inc. will invest around $1.8 billion as part of a strategic partnership. Tokio Marine's shares were bid to their upper daily limit.
Berkshire's investment is likely to boost interest in other Japanese shares, just as its earlier stakes did for trading houses, according to Hideyuki Ishiguro, chief strategist at Nomura Asset Management Co.
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