Asian stocks experienced cautious gains on Tuesday, June 16, following a rally in the previous session driven by news of a US-Iran peace deal. Investors were also keenly assessing the Bank of Japan's interest rate decision. The Bank of Japan voted 7-1 to raise its benchmark policy rate to 1%, a level last observed in 1995. This decision led to the Nikkei 225 jumping 0.9% (or 0.6% in some reports) to an all-time peak above 70,000, while the yen edged up 0.1% to 160.215 against the US dollar (or was flat at 160.31 in other reports) businesstimes.com.sg, channelnewsasia.com, in.marketscreener.com.
The initial excitement over the preliminary US-Iran agreement began to wane, leading markets to adopt a more measured tone regarding Gulf developments. This caution was reflected in oil prices, with Brent crude futures sliding 0.3% to finish at a three-month low of either US$82.90 or US$82.96 a barrel. Shippers in Asia and Europe indicated that rebuilding confidence for transit through the Strait of Hormuz could take several weeks. Analysts, including those from Westpac, noted that while the deal is a significant diplomatic breakthrough, its durability will be tested, with many sticking points like Iran’s nuclear program requiring further negotiations businesstimes.com.sg, channelnewsasia.com, in.marketscreener.com.
Overnight on Wall Street, stocks and bonds had rallied in anticipation of the deal. The S&P 500 jumped 1.7%, the Nasdaq Composite surged 3.1%, and both the Dow Jones Industrial Average and the STOXX 600 closed at record highs. In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.4%, with South Korean shares rising 2.3% (or 2%). However, Hong Kong stocks weighed on the benchmark due to weaker-than-expected retail sales and fixed-asset investment data from China. S&P 500 e-mini futures traded flat or down 0.1% after fluctuating businesstimes.com.sg, channelnewsasia.com, in.marketscreener.com.
Beyond geopolitics, traders were also looking ahead to other central bank decisions and announcements. The Reserve Bank of Australia was expected to pause its tightening cycle later on Tuesday. Bank of Japan Deputy Governor Shinichi Uchida was scheduled to hold a press briefing to explain the central bank's rate hike, as Governor Kazuo Ueda was undergoing medical treatment. Analysts from Mitsubishi UFJ anticipated that Uchida's explanation would largely reflect Governor Ueda's June 3 speech and that he would follow Ueda's remarks in discussing future policy decisions businesstimes.com.sg, channelnewsasia.com, in.marketscreener.com. The US dollar index rose 0.1% to 99.75, and the yield on the US 10-year Treasury bond was up 0.8 basis points at 4.475% channelnewsasia.com, in.marketscreener.com.
