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James Hyerczyk

The major Asia Pacific stock indexes rebounded on Tuesday as investors reassessed the risk of an escalation of the conflict between the United States and Iran. Shares were mostly underpinned by a strong performance in U.S. technology stocks.

Early Tuesday, there was evidence that crude oil traders had begun lifting hedges placed as protection against a crude oil supply disruption. At the same time, demand for safe-haven projection was falling as investors trimmed positions in U.S. Treasurys, gold and the Japanese Yen.

Japan’s Nikkei 225 Index settled at 23575.72, up 370.86 or +1.60, South Korea’s KOSPI Index closed at 2175.54, up 20.47 or +0.95% and Hong Kong Hang Seng Index finished at 28322.06, up 95.87 or +0.34%.

China’s Shanghai Index settled at 3104.80, up 21.39 or +0.69% and Australia’s S&P/ASX 200 closed at 6826.40, up 90.70 or 1.35%.

US-Iran Relations

There were little fresh developments in the conflict between the United States and Iran. Despite the relative calm in the markets, investors remained cautious about a possible further escalation, while waiting for a possible retaliation against the U.S. by Iran for the killing of a prominent Iranian Major-General on Friday.

In related news, the Pentagon on Monday said that a U.S. general’s letter informing Iraq’s Defense Ministry that U.S.-led coalition troops would leave Iraq “was a mistake,” and American Defense officials insisted that the troops would remain there.

Meanwhile, Secretary of Defense Mark Esper told reporters earlier, “We are repositioning forces throughout the region, No. 1,”

Over the weekend, Iraq’s parliament voted to expel all foreign forces from the country.

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China Shares Climb; New Agricultural Purchases Concerns

China’s benchmark index closed at its highest level in more than eight months on Tuesday, resuming a rally prompted by hopes of a brighter trade outlook and more policy support, as worries over Middle East tensions eased.

In other news, questions are being raised over how China will meet a target of spending billions of dollars more on agricultural goods after the world’s second largest economy said it will not increase its annual low-tariff import quotas for corn, wheat and rice to accommodate stepped-up purchases of farm goods form the United States, local media quoted senior agriculture official Han Jun as saying on Tuesday.

Australian Shares Rise; Energy and Gold Shares Retreat

Australian shares rose on Tuesday, led by gains in financial and healthcare stocks, as an absence of a further escalation in U.S.-Iran tensions revived investor appetite for riskier assets.

The financials sub-index gained 1.5% to a more than two-week closing high. The gold index retreated 2.1% as a rest in Middle East tensions dented bullion prices and safe-haven appeal.

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