(Sharecast News) - Asia-Pacific markets traded mostly higher on Tuesday, with investors largely shrugging off geopolitical tensions in Iran and Venezuela as well as a criminal investigation into US Federal Reserve chair Jerome Powell.
Risk appetite was supported by a rebound in Japanese equities after a holiday and by firmer oil prices, with Brent crude rising 1.55% to $64.86 and West Texas Intermediate gaining 1.65% to $60.48 amid ongoing protests in Iran and renewed tariff threats from US president Donald Trump.
As Patrick Munnelly, market strategy partner at TickMill, noted, "the rally in markets carried over to Asia, where attractive valuations and promising growth prospects drew investors' attention away from US markets," adding that broader global equity momentum remained constructive, with the MSCI All Country World Index climbing 0.1% to a record high.
Tokyo returns from holiday with a bounce
In Japan, the Nikkei 225 jumped 3.1% to 53,549.16, leading regional gains as expectations grew that the ruling Liberal Democratic Party will dissolve the Lower House later this month and call a snap election in February, according to public broadcaster NHK.
The broader Topix advanced 2.41% to 3,598.89.
Pacific Metals surged 10.08%, Lasertec climbed 8.89% and Advantest rose 8.54%.
Bond yields also moved higher, with the 10-year Japanese government bond yield up more than five basis points to 2.15% and the 20-year yield rising over eight basis points to 3.137%.
Munnelly said Japan "saw the most action, with its stock market rallying and government bond yields climbing as speculation grew that prime minister Takaichi might call for a snap election," adding that stocks in defence and nuclear sectors surged as part of what analysts have dubbed the "Takaichi trade".
Economic data in Japan showed further support from external balances.
The current account surplus in November rose 10.0% year on year to a record JPY 3.67trn for the month, as a sharply wider goods trade surplus and steady returns on foreign investments offset a deterioration in services.
Goods trade recorded a surplus of JPY 625.3bn, more than five times higher than a year earlier, with exports up 5.1% to JPY 9.39trn and imports down 0.5% to JPY 8.77trn.
Primary income increased 0.2% to JPY 3.38trn, while the services balance swung to a deficit of JPY 44.1bn from a surplus a year earlier, partly reflecting an 18.9% fall in the travel surplus despite foreign arrivals rising 10.4% to a record 3.52 million.
Munnelly added that concerns around a potential election had "raised expectations of increased fiscal spending and accelerated inflation," leaving the yen "trailing behind its group-of-10 peers".
Mainland equities retreat, Hong Kong in the green
Mainland Chinese equities retreated, with the Shanghai Composite down 0.64% at 4,138.76 and the Shenzhen Component falling 1.37% to 14,169.40.
Beijing Piesat Information Technology slid 12.43%, Xi'an Bright Laser Tech dropped 11.41% and Aisino Corp lost 10.03%.
By contrast, Hong Kong markets advanced, with the Hang Seng Index up 0.9% at 26,848.47, led by gains of 8.3% in WuXi AppTec, 5.85% in WuXi Biologics and 3.63% in Alibaba Group.
More broadly, Munnelly said futures for European equities were signalling further gains, while US markets were expected to open on a quieter note following the S&P 500's record close on Monday.
South Korean stocks also rose, with the Kospi adding 1.7% to 4,692.64.
Kumho Electric surged 29.94%, CTR Mobility jumped 20.75% and THN advanced 18.12%.
In Australia, the S&P/ASX 200 climbed 0.56% to 8,808.50, supported by gains of 6.72% in Austal, 6.2% in Iluka Resources and 5.17% in Greatland Resources.
New Zealand underperformed, with the S&P/NZX 50 easing 0.2% to 13,656.05 as Sanford fell 3.69%, Vector declined 3.44% and Ebos Group slipped 2.84%.
Dollar strengthens as oil prices remain in focus
In currency markets, the dollar strengthened modestly, last trading up 0.46% on the yen at JPY 158.87, as it moved 0.16% higher against the Aussie at AUD 1.4926, and advanced 0.18% on the Kiwi to change hands at NZD 1.7356.
Munnelly noted that "the Japanese yen tumbled to its weakest level against the US dollar since July 2024," as falling bond prices and rising yields accompanied the equity rally.
Oil prices remained in focus as traders assessed the risk of escalation in Iran, after Trump said any country doing business with Iran would face a 25% tariff on all trade with the United States, effective immediately, with Munnelly adding that Brent crude had surged to its highest level since November on fears of potential sanctions.
Reporting by Josh White for Sharecast.com.
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