New Delhi: Markets got off to an uneven start in Asian trading on Wednesday as worries about the Iran conflict and health of the AI sector dominated ahead of the Federal Reserve’s decision and earnings from tech megacap stocks later in the session.
MSCI broadest index of Asia-Pacific outside Japan slipped 0.2 per cent, extending its pullback for a second straight session after hitting record highs on Monday. Losses were led by declines in Taiwanese chipmakers, while Japanese markets remained closed due to a holiday.
Meanwhile, S&P 500 E-mini futures edged up 0.1 percent. Oil prices moved higher, with Brent crude rising 0.4 per cent to $111.71 per barrel, as efforts to resolve the Iran war showed little progress.
“Markets remained cautious overnight as peace talks continued to stall, with Iran seeking the lifting of the U.S. naval blockade of the Strait of Hormuz and mediators expecting a revised Iranian proposal in coming days,” analysts from Westpac wrote in a research note.
President Donald Trump is dissatisfied with the latest proposal from Iran, as he wants nuclear issues to be addressed at the outset, according to a U.S. official. Meanwhile, The Wall Street Journal reported on Tuesday that Trump has directed aides to prepare for a prolonged blockade of Iran.
Stocks weakened on Wall Street on Tuesday, with the S&P 500 declining 0.5 per cent and the Nasdaq Composite .IXIC falling 0.9 per cent as markets reacted to the ongoing stalemate in Iran.
Tech stocks also came under pressure after the Journal reported that OpenAI had missed internal targets for user growth and revenue, raising concerns about its ability to sustain massive spending on data centres. The report weighed on shares of Oracle and CoreWeave.
Earnings from major U.S. tech firms, including Microsoft, Alphabet Inc., Amazon, and Meta Platforms, due on Wednesday, are expected to provide further insight into the sustainability of the AI-driven market rally.
Despite geopolitical tensions, Corporate America has remained relatively strong. With slightly more than one-third of S&P 500 sectors having already reported profits, 81 per cent of companies have beaten estimates.
Attention is now turning to the policy decision from the Federal Reserve, which will be the final meeting chaired by Jerome Powell.
Traders believe a hold is a certainty. Fed funds futures are pricing an implied 100% probability the U.S. central bank will stand pat, with no policy changes expected until late in 2027, according to the CME Group’s FedWatch tool.
“Given the challenging war-impacted inflation environment, it won’t cost much for the Fed to adopt a hawkish tilt; while remaining in a wait-and-see mode,” analysts from ING wrote in a research report. “There will also be questions on the incoming Kevin Warsh and Powell’s intention to stay or go.”
The yield on the U.S. 10-year Treasury bond rose by 0.6 basis points to 4.346 per cent, while the U.S. Dollar Index—which tracks the greenback against a basket of six currencies—edged up 0.1 per cent to 98.67, marking its second straight day of gains.
Markets also assessed the unexpected exit of the United Arab Emirates from OPEC, although expectations remain that the rest of the oil-producing alliance will continue to hold together.
“On any other given day, this news may have seen the Brent price move down $5 to $6 off the bat, given the UAE accounts for around 10per cent of OPEC output,” said Chris Weston, head of research at Pepperstone Group Ltd in Melbourne.
“However, with the UAE’s production facilities currently close to capacity, it is perhaps no surprise that Brent front-month futures quickly erased the initial drop.”
(DD News)
