By Ankur Banerjee
SINGAPORE, April 28 (Reuters) – Stocks held their ground on Tuesday as investors weighed the geopolitical tumult in the Middle East, while the yen firmed after the Bank of Japan held rates steady but the split voting underscored worries over inflation because of the war.
The BOJ, in an expected move, held short-term rates steady at 0.75% but three on the nine-member board proposed hiking borrowing costs, signalling the central bank’s concerns over inflationary pressures from the Middle East conflict.
Markets will now focus on comments from Governor Kazuo Ueda for clues on how the protracted Iran war affects the central bank’s rate-hike path.
The yen strengthened a touch to 159.21 per U.S. dollar, but was near the 160 level that traders have been worried about as a breach beyond it might spur Tokyo to step in to support the currency.
The yen has been straddling 159 since mid-March. Japan’s Nikkei was down 0.5% after scaling a fresh peak in the previous session.
“A close call for the BOJ,” said Fred Neumann, chief Asia economist at HSBC, noting the three dissenting votes highlight the tensions monetary officials face, with Japan not alone in facing the dilemma whether to tighten policy into an energy price shock.
“Still, today’s message from the Bank of Japan is that it remains poised to tighten policy sooner than later.”
MARKETS AWAIT CLARITY ON US-IRAN TALKS, HORMUZ
In geopolitics, the U.S. was reviewing Tehran’s latest proposal to resolve the war in the Middle East but a U.S. official said President Donald Trump was unhappy with the proposal because it did not address Iran’s nuclear programme.
That leaves the two-month-long conflict in a stalemate with energy and other supplies through the critical Strait of Hormuz at a standstill, keeping oil prices well above $100 per barrel.
In stocks, MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.22%, hovering near the record high it touched on Monday. The index is on course for a 17% rise in April after dropping 13.5% in March.
The S&P 500 eked out modest gains on Monday, poised for about a 10% gain for the month. U.S. stock futures were flat in Asian hours on Tuesday, while European futures pointed to a higher open.
Global monetary policy will be in the spotlight this week, with the U.S. Federal Reserve, the Bank of England and the European Central Bank due to announce policy decisions after the BOJ. All are expected to hold rates unchanged but attention will be on comments from policymakers on pricing pressure.
The euro was steady at $1.1716, with the dollar index, which measures the U.S. currency against six major units, at 98.498.
The dollar benefited in March from safe-haven flows as war in the Middle East erupted but shed most of those gains on hopes of a peace deal this month. It has steadied in recent days after U.S.–Iran talks stalled.
The war has also sent oil prices surging, fuelled inflation and cast a shadow over the outlook for global growth, with the closure of the Strait of Hormuz, which normally carries a fifth of global oil and gas shipments, a key risk.
Brent crude futures edged up to $109.19 a barrel, near a three-week high. U.S. West Texas Intermediate was at $97.22. Oil prices are well above pre-war levels but have pulled back from their peak on hopes for a peace deal. [O/R]
Investors are also focusing this week on earnings from tech giants Microsoft, Alphabet, Amazon, Meta Platforms and Apple that will be a test for the blistering AI-driven rally in April.
Anthony Saglimbene, chief market strategist at Ameriprise, said the earnings will provide the market with a real-time read on whether AI investment is translating into commercial results.
“The divergence between equity market optimism and the more cautious signals from bond and oil markets, however, reinforces the view that geopolitical developments remain an active and important variable in risk management,” Saglimbene said.
(Reporting by Ankur Banerjee in Singapore; Editing by Kim Coghill and Jacqueline Wong)
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