Asian financial markets edged cautiously on Tuesday in holiday-reduced trading, but oil rose as US-Iran nuclear talks in Geneva are set to begin later in the day.
Markets in mainland China, Hong Kong, Singapore, Taiwan and South Korea were closed on Tuesday for the Lunar New Year holiday. US markets were closed on Monday for President’s Day.
Japan’s Nikkei 225 fell 0.5%, and the broader Topix fell 0.2% to 3,779.29.
In Australia, the S&P/ASX200 traded almost 0.5% higher.
Ten-year government bond yields fell 1 basis point to 4.044% on Tuesday, hitting their lowest level since early December. Japan’s five-year yield fell 2 basis points to 1.65%, its lowest level since February 2.
In early Asian trading, Nasdaq futures fell 0.1% and S&P 500 futures rose 0.2%.
The dollar index, a measure of the US currency against its major rivals, was last unchanged at 97.07, after a small gain of 0.2% overnight.
Japan’s weakening economy remained in focus on Tuesday, a day after much weaker-than-expected GDP data.
The country reported on Monday that its economy grew by 0.2% year-on-year in the fourth quarter, well below forecasts for growth of 1.6%, as government spending slowed activity, SEEbiz reports. On Tuesday, the Japanese yen gained 0.15% against the dollar to 153.28 per dollar.
The weak numbers underscore the challenges facing Prime Minister Sanae Takaichi and should support her push for more aggressive fiscal stimulus, economists said.
The Bank of Japan’s next interest rate meeting will take place in March, and traders see little chance of a hike. Economists polled by Reuters last month expected the central bank to wait until July before tightening policy again.
“The market likely assumed that weaker fourth-quarter GDP data would boost Prime Minister Takaichi’s plans to offer additional fiscal support and cut food sales tax,” NAB analysts wrote in a research note.
“Prices for a Bank of Japan rate hike fell slightly after the GDP data, given that only 4 basis points are forecast for the March meeting and 16 basis points for April.”
Australia’s central bank said on Tuesday it concluded inflation would remain stubbornly high if it did not raise interest rates as it did this month, and was not yet sure whether further tightening would be needed.
Oil prices were higher ahead of talks between the US and Iran aimed at de-escalating tensions in the context of an expected increase in OPEC+ supply.
US West Texas Intermediate crude rose 1.29%. Brent crude oil futures rose 1.33% overnight.
Iran’s Revolutionary Guards held an exercise in the Strait of Hormuz on Monday, the semi-official Tasnim news agency reported, a day ahead of renewed talks between Iran and the US on its nuclear program. The passage accounts for about 20% of global oil shipments.
“The market remains unsettled by geopolitical uncertainties, with investors wary of upcoming talks between the US, Iran and Ukraine this week,” ANZ analysts said.
“Speculative positions have been rising in recent weeks. If tensions in the Middle East ease or significant progress is made in the war in Ukraine, the risk premium currently embedded in oil prices could quickly decline.”
Gold fell 0.85% to $4,949.5 an ounce as a stronger dollar on Monday made gold bullion priced against the U.S. dollar more expensive for holders of other currencies. Spot silver was 2% lower.
