Asian Shares Track Wall Street to Record Highs but Higher Oil Prices a Risk

Asian shares pull back from record highs as oil gains on Iran risk

Market Overview and Key Drivers

By Stella Qiu and Ankur Banerjee

Asian Markets Retreat After Rally

SYDNEY, April 23 (Reuters) - Asian shares retreated from record highs on Thursday as investors took some money off the table from a technology-driven rally, while oil prices rose for a fourth straight day as a fragile ceasefire in the Middle East hung in the balance.

Wall Street Performance and Impact

Overnight, the S&P 500 climbed 1% and the Nasdaq jumped 1.6% to notch fresh record-closing highs, helped by a strong start to the earnings season that has eased concerns about the health of the U.S. consumer despite rising energy prices from the Iran war.

Regional Indices Movements

MSCI's broadest index of Asia-Pacific shares outside Japan had earlier tracked Wall Street and rallied to a record of 831.56 points, but selling soon kicked in. It was last down 0.7%.

Japan's Nikkei vaulted to a new high for a second day before falling over 1%. Markets in Taiwan and South Korea also hit new highs and then turned lower.

China's blue chips slipped 0.3% and Hong Kong's Hang Seng index fall 0.9%

Oil Prices and Geopolitical Tensions

Oil Price Surge

Higher oil prices were partly to blame, with Brent crude futures up another 1.3% on Thursday to $103.18 a barrel, having jumped 3.5% overnight to cross back above $100. 

Iran and the Strait of Hormuz

Iran on Wednesday captured two container ships seeking to exit the Gulf via the Strait of Hormuz, tightening its grip on the crucial waterway, as investors watch if the fragile ceasefire in the Middle East will hold.

Market Sentiment and Analyst Commentary

Nick Twidale, chief market strategist at ATFX Global, said the increased tension in the Middle East is starting to spook investors as further ship seizures erode hopes of more peace talks.

"We saw the spike to record highs on the back of Wall Street's overnight performance, but then the pullback as a bit of a reality check on what is happening in the Middle East."

Global Market Reactions

Futures and European Outlook

Wall Street futures fell in Asia after the earnings-driven rally, with Nasdaq futures off 0.5% and S&P 500 futures down 0.7%. European stock futures are bracing for a much weaker open, with pan-region futures down 1.1%.

Company Highlights

Shares of GE Vernova surged 13.75% after the power equipment maker raised its annual revenue forecast on the AI boom, and Boeing advanced over 5% after a smaller-than-expected quarterly loss. 

Electric automaker Tesla reported a surprise positive free cash flow in the first quarter, but its projection of sharply higher spending plans on AI and robotics drew scepticism from investors, with its shares down 2% after the bell. 

Other Financial Markets

Treasury Yields

Treasury yields edged up. The two-year U.S. Treasury yield rose 2 basis points to 3.8106%, after inching up 1 bp on Wednesday. The 10-year yield increased 2 bps to 4.3174%, after finishing little changed overnight. 

Currency Movements

Currencies were mostly calm, with the dollar holding onto small gains from overnight. The euro was steady at $1.17, just above a 10-day low of $1.1691, having lost 0.3% overnight.

Outlook and Risks

"Markets have been remarkably effective at looking through risks – and may continue to be. But the list of risks is growing as resolutions remain elusive," said Laura Cooper, global investment strategist at asset manager Nuveen.

"The dissonance cannot hold indefinitely ... At some point, the weight of what is being ignored could become the only one that matters."

(Editing by Kim Coghill and Shri Navaratnam)