(Sharecast News) - Asia-Pacific markets were mostly lower on Friday after all three major Wall Street indexes declined overnight, pressured by weakness in private credit stocks and rising tensions between the United States and Iran.
As Stephen Innes of SPI Asset Management put it, "Right now, the geopolitical book looks like it is being written by Polymarket odds and cable news chyron writers," with markets fed "a steady diet of tail risk."
Oil prices were volatile after US president Donald Trump said he would decide within the next 10 days whether to take military action against Tehran, lifting geopolitical risk across the region.
Brent crude futures were last down 0.36% on ICE at $71.40 a barrel, and the NYMEX quote for West Texas Intermediate fell 0.45% to $66.13.
Innes cautioned that "there is a disconnect between betting odds that imply an escalation probability and voter data that imply a stay-out-of-Iran stance. One of those will eventually reprice."
Tokyo falls after wave of data
In Japan, the Nikkei 225 dropped 1.12% to 56,825.70 and the broader Topix fell 1.13% to 3,808.48.
Sumitomo Dainippon Pharma swung sharply in early trade, rising as much as 6.81% before closing 15.6% lower, while Olympus declined 4.39% and Seven & i Holdings lost 4.26%.
Data showed Japan's headline inflation eased to 1.5% in January, its lowest level since March 2022, ending a 45-month run above the Bank of Japan's 2% target.
Core inflation, excluding fresh food, slowed to 2% from 2.4% in December, matching forecasts, while 'core-core' inflation, which strips out fresh food and energy, eased to 2.6% from 2.9%.
Goods inflation fell to 1.6% from 2.7%, its weakest since August 2021, while services inflation held at 1.4%.
The slowdown reflected declines in fresh food, raw meat, fresh flowers and petroleum products, with rice inflation easing for an eighth straight month to 27.9%.
The Bank of Japan this month upgraded its 2026 core inflation forecast to 1.9% and its core-core projection to 2.2%, and said price growth was likely to fall below 2% in the first half of 2026 as food prices stabilised and government measures to ease living costs took effect.
Prime minister Sanae Takaichi, who won a landslide victory in the 8 February Lower House election with 316 seats for the Liberal Democratic Party, had pledged to suspend an 8% food tax for two years and shift away from "excessive fiscal austerity" while avoiding "reckless fiscal policies".
She also warned against China's "coercion" in the East and South China Seas.
Japan's economy expanded 0.1% in the fourth quarter, narrowly avoiding a technical recession
Separately, the S&P Global Japan manufacturing PMI rose to 52.8 in February from 51.5, the strongest expansion since May 2022, driven by firm domestic and overseas demand and the fastest rise in export orders in eight years.
The 10-year Japanese government bond yield fell 4 basis points.
Hong Kong down, Seoul in the green
Hong Kong's Hang Seng Index declined 1.1% to 26,413.35, led lower by JD Health International, down 6.27%, Baidu, off 6.25%, and Alibaba Group, which fell 4.91%.
Mainland Chinese markets remained closed for the Lunar New Year holiday.
In contrast, South Korea's Kospi 100 rose 2.37% to 6,600.23, touching a record high for a second straight session as chip and defence stocks rallied.
Hyundai Steel jumped 11.76%, Hanwha Systems gained 9.49% and Posco Daewoo advanced 8.82%.
Sydney, Wellington in the red as investors digest fresh data
Australia's S&P/ASX 200 was little changed, edging down 0.05% to 9,081.40.
Guzman Y Gomez slumped 13.94%, Megaport fell 11.79% and Liontown Resources lost 6.36%.
The S&P Global flash Australia composite PMI eased to 52.0 in February from 55.7 in January, marking a 17th month of expansion but at a slower pace.
Services activity slowed to 52.2 from 56.3 and manufacturing slipped to 51.5 from 52.3, as new business growth cooled and overseas manufacturing orders rose only marginally.
Business sentiment weakened to its lowest since mid-2024, while employment growth accelerated to an 11-month high and both input costs and selling prices rose at their fastest pace since September 2025.
Across the Tasman Sea, New Zealand's S&P/NZX 50 fell 1.01% to 13,308.52, with Eroad down 4.3%, Synlait Milk off 4.12% and Ebos Group 4.01% lower.
The country's annual trade deficit widened to NZD 2.3bn in January from NZD 2.2bn previously, highlighting continued weakness in export demand.
It came amid softer global dairy prices, which fell an average 3.5% in the final auctions of 2025, and sluggish Chinese manufacturing activity.
The data increased expectations that the Reserve Bank of New Zealand could cut the Official Cash Rate in the second quarter, in contrast to a pause signalled by the US Federal Reserve.
Dollar strengthens on regional peers
In currency markets, the dollar strengthened 0.14% against the yen to last trade at JPY 155.22, rose 0.09% against the Aussie to AUD 1.4185, and gained 0.03% on the Kiwi to change hands at NZD 1.6793.
Reporting by Josh White for Sharecast.com.
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