Asian Stocks Rebound as Investors Reassess US-Iran Conflicts

SYDNEY, Australia – Asian stocks rebounded on Tuesday following market players trying to reassess the risks regarding the all-out tension between the US and Iran, while Wall Street was boosted by the increase in tech shares.

Monday has seen a lot of losses of equities in the Asian market, but the drop in stock prices from the previous session rebounded on Tuesday with the MSCI’s biggest index of Asia-Pacific stocks excluding Japan tracking 0.7% gains.

The Nikkei 225 index of Japan also rallied for the day, settling with around 1.4% increase, while the Shanghai bluechip indexes added 0.5%. The S&P 500 E-Minis also strengthened after seeing a modest 0.2% advance for the day, while the FTSE and EURO STOXX 50 futures increased by 0.6% and 0.4%, respectively.

During the previous session, most Asian stocks dropped sharply following the traded threats between the US and Iran after Washington’s airstrike in Iraq on January 3, which killed a prominent Iran commander.

But as the session passed without any new headlines regarding aggression from both parties, the mood in the market has largely calmed down. Meanwhile, there was a little bit of confusion after reports that the US Military sent a letter to Iraq on Monday detailing that it would pull out its force from the country. However, the Defense Secretary of the US, Mark Esper, said during an interview that there hadn’t been any decision made.

With the lack of news regarding the tension between the two countries, most of the market choice to be hopeful, which boosted Wall Street on Tuesday. The Dow Jones recorded a 0.24% increase, while Nasdaq and S&P 500 indexes tracked 0.56% and 0.35% gains, respectively.

The result of the survey in the service sector was also released overnight, which showed a significant improvement in the US economy as well as in the EU and UK. The positive data also stirred speculation that there will also be an increase for the closely-watched ISM reports of the services sector in the US, which is scheduled later in the session.

According to the chief economist at the RBC Capital Markets, Tom Porcelli, the longest recorded expansion for the US still has many legs, plus, the issue with Iran also adds a new layer of complexity.

The mostly calmer sentiment in the market on Tuesday also saw the Japanese yen drop most of its safe-haven gains. The US dollar rebounded from its Monday close at 107.75 to its current 108.48 against the yen.