SINGAPORE: Asian stocks soared to record highs on Thursday (May 7) while the US dollar slipped and oil nursed steep losses as traders embraced the prospect of a peace deal in the Middle East, although the fate of the critical Strait of Hormuz remains unresolved.
Japan’s Nikkei returned from a long holiday to cross 62,000 for the first time, catching up on a blistering AI-led rally after robust earnings that also catapulted South Korean and Taiwan stocks to records.
The benchmark Nikkei 225 index rose 4.19 per cent to 62,009.59. The broader Topix climbed 2.12 per cent to 3,807.84.
MSCI’s broadest index of Asia-Pacific shares outside Japan was up 1 per cent, hitting another all-time high. The index is up 7 per cent so far this week.
Kyle Rodda, senior financial analyst at Capital.com, said the market moves on Thursday were justified as a deal would be a breakthrough.
“But we’ve seen this story before, and the rug could get pulled out of the market pretty quickly too. Ultimately, if we keep seeing progress in talks, Asian markets will keep rallying.”
“Today’s sharp gain of the Nikkei was led by the strong performance of chip shares, driven by Advanced Micro Devices’s strong forecast,” said Takamasa Ikeda, a senior portfolio manager at GCI Asset Management. “The contents of the US-Iran peace proposals are thin, but there is an expectation in the market that further military action will not take place.”
Iran said it was reviewing a peace proposal that sources said would formally end the war while leaving unresolved the key US demands that Iran suspend its nuclear program and reopen the Strait of Hormuz, whose closure has sent oil prices surging.
A potential deal to end the war, which started at the end of February, sent oil prices sliding nearly 8 per cent on Wednesday. Brent crude was a touch higher at US$102.11 a barrel in early Asian hours on Thursday.
Still, oil prices are around 40 per cent higher than they were when the conflict began, while 10-year Treasury yields are around 40bps higher, underscoring the challenge facing the global economy from higher energy prices and pricing pressures.
“Even if the strait reopens in coming weeks, oil is likely to stay elevated and slow to ease given damage to energy infrastructure and precautionary stockpiling,” said OCBC analysts in a note.
Federal Reserve officials said the war is raising the risk of a sustained inflation shock, with continued high oil prices and developing concerns about problems with global supply chains.
