Asian Stocks Slip as Yen, Treasuries Climb on AI Jitters, Iran Risks

By Rocky Swift

Markets Retreat on AI Valuation and Geopolitical Risks

TOKYO, Feb 27 (Reuters) - Dour sentiment persisted in the Asian trading day on Friday as concerns about technology company valuations weighed on shares and Middle East tensions kept energy markets on edge. 

Japanese shares followed Wall Street lower after what appeared to be glowing results from AI sector bellwether Nvidia failed to impress investors. The yen and U.S. Treasuries rose, while gold held steady after a two-day advance. 

Geopolitics: U.S.–Iran Talks Keep Oil Cautious

An Omani mediator of U.S. and Iran nuclear talks gave an optimistic readout over the latest round of negotiations, but uncertainty still hung over energy markets with no sign of a breakthrough that would avert potential U.S. strikes.

Analysts’ take on risk appetite

"AI and geopolitics remained front and centre for financial markets, prompting a retreat from risk assets and a shift towards safe havens," Mantas Vanagas, senior economist at Westpac Group, wrote in a note. 

"With no major breakthroughs announced in the U.S.–Iran talks, crude markets remained in wait-and-see mode, continuing to price in a significant risk of military escalation between the two countries," he said.

Equities: Asia Follows Wall Street Lower

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.4%, while Japan's Nikkei stock index slid 0.8%. 

Nvidia beats, but sentiment sours

Nvidia posted better-than-expected results for the January quarter on Wednesday and forecast current-quarter revenue above market estimates. But U.S. shares ended lower and the company's stock was flat in after-hours trading.

U.S. equity futures edge lower

U.S. equity futures slid in Asian trading, with the S&P 500 E-minis down 0.41% and the tech-heavy Nasdaq 100 E-minis dropping 0.36%.

"It seems 'the Street' simply wanted more, or perhaps just isn't prepared to chase the stock at its current lofty valuation," IG market analyst Tony Sycamore said about Nvidia's results in a note.

Dollar index edges up, euro steady

Currencies and Bonds: Yen Firms, Treasuries Gain

The dollar index, which measures the greenback against a basket of currencies, rose 0.04% to 97.77, with the euro little changed at $1.1797. 

The yen strengthened 0.2% to 155.86 per dollar.  Sterling was steady at $1.3482. 

Omani mediator signals progress

The U.S. and Iran plan to resume negotiations over Tehran's nuclear program after consultations in their countries' capitals, Omani Foreign Minister Sayyid Badr Albusaidi said in a post on X after the day's meetings in Switzerland. 

Any substantial move forward could curb chances for U.S. President Donald Trump to carry out a threatened attack on Iran that many fear could escalate into a wider war.

Benchmark U.S. yields slip

The yield on benchmark U.S. 10-year notes fell 1.5 basis points to 4.002%. The 30-year bond yield fell 1.3 basis points to 4.6565%. 

Tokyo inflation cools; factory output weak

Japan and China: Data and Policy Moves

Data in Japan showed cooling inflation in Tokyo and weaker-than-expected factory output, complicating the case for policy rate increases by the central bank. The data came on the heels of Prime Minister Sanae Takaichi putting forward two Bank of Japan board nominees who share her fiscally dovish mindset. 

PBOC adjusts FX forward reserves

China's central bank said on Friday it will scrap the foreign exchange risk reserves for some forward contracts, a move that would reduce the cost of dollar buying. 

Yuan extends gains past 7-per-dollar

The yuan notched its biggest annual gain against the dollar since 2020 last year, strengthening past the psychologically important 7-per-dollar level, and the upward momentum has continued into the new year. 

UK Politics: By-Election in Greater Manchester

In Britain, a by-election will be closely watched, as a defeat for the Labour Party could add to pressure on British Prime Minister Keir Starmer following criticism over several recent policy reversals. 

Gorton and Denton race too close to call

Polls say the vote in Gorton and Denton, in northwestern England's Greater Manchester, is too close to call between Labour, populist Reform UK and the left-leaning Greens. 

Crude ticks higher, gold eases

Spot gold fell 0.23% to $5,175.03 an ounce, while U.S. crude rose 0.09% to $65.27 a barrel. 

Crypto: Bitcoin and Ether Dip

In cryptocurrencies, bitcoin fell 0.3% to $67,290.45 and ether declined 0.68% to $2,016.78.    

(Reporting by Rocky Swift; Editing by Tom Hogue)