Key facts
- Asian stocks showed tempered optimism Tuesday after earlier rallies on a US-Iran peace deal.
- Investors are now focused on central bank decisions, including an expected rate hike from the Bank of Japan.
- Oil prices remained cautious, reflecting ongoing concerns about transit through the Strait of Hormuz.
- The Nikkei 225 retreated from a record high, while S&P 500 e-mini futures slipped.
- The U.S. dollar index held steady, and the 10-year Treasury yield edged up.
- Bitcoin and Ether prices declined.
Asian stocks inched up Tuesday after rallying on news of a peace deal between Iran and the U.S., as investors turned their focus to several central bank decisions, including an expected rate hike from the Bank of Japan. Early trading in the region showed markets settling into a more measured tone on Gulf developments as the initial excitement over the preliminary agreement between Washington and Tehran began to fade. Oil prices, which settled at a three-month low overnight, reflected this cautious stance.
MSCI's broadest index of Asia-Pacific shares outside Japan added 0.2%, with Korean shares leading gains. Japan's Nikkei 225 was down 0.2%, retreating from a record high as S&P 500 e-mini futures slipped 0.1%. While U.S. President Donald Trump's announcement of a deal with Iran drew initial investor relief on Monday, it also puts Washington on a collision course with Israel.
Analysts from Westpac noted that while it is an important diplomatic breakthrough that should remove a key source of market volatility, the durability of the deal is likely to be tested in the future, with many sticking points left to be resolved in subsequent negotiations.
Overnight on Wall Street, stocks and bonds rallied on optimism over the deal. The S&P 500 jumped 1.7% and the Nasdaq Composite surged 3.1%, while the Dow Jones Industrial Average and the STOXX 600 both closed at record highs.
Traders are awaiting several major central bank decisions, including the Bank of Japan, which is set to raise interest rates to a 31-year high on Tuesday. Deputy Governor Shinichi Uchida will hold a press briefing after the meeting, which Governor Kazuo Ueda will miss because he is undergoing medical treatment. Analysts from Mitsubishi UFJ wrote that they do not anticipate any major changes to the Bank's assessment of current conditions and expect Deputy Governor Uchida's press conference, including the rationale he presents for the rate-hike decision, will be based largely on Governor Ueda's June 3 speech.
The Reserve Bank of Australia will pause its tightening cycle when it meets later, according to a Reuters poll of economists. The U.S. dollar index held steady at 99.66, and the yield on the U.S. 10-year Treasury bond was up 0.8 basis point at 4.475%. Gold was up 0.2% at $4,313.87. In cryptocurrency markets, bitcoin was down 0.3% at $66,245.97, while ether slumped 1.2% to $1,793.70.