Asian Shares Pull Back From Record Highs As Oil Gains on Iran Risk

SYDNEY: 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.

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.

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%

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 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.

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."

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%.

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.

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.

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.

"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."