Asian stocks rise as US-Iran ceasefire eases central banks’ rate hike odds

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Asian equities rise following a rally on Wall Street overnight as the United States (US)–Iran ceasefire triggered a sharp drop in oil prices, easing concerns over renewed inflation and further rate hikes by the central banks.

Asian stocks advance as the rate hike concerns ease after the US–Iran ceasefire.
Asian markets may struggle as risk aversion rises amid persistent uncertainty over the fragile US–Iran ceasefire.
President Trump said US forces will remain deployed around Iran until full compliance with the agreement.

At the time of writing, Japan’s Nikkei 225 is trading 1.85% higher near 56,900, while Hong Kong’s Hang Seng Index is up over 0.64% to near 25,900, China’s SSE Composite Index gains 0.77% to near 4,000, and South Korea’s Kospi gains 1.55% to near 5,870.

However, the Asian stocks may struggle as traders remain cautious amid renewed risk aversion driven by ongoing uncertainty surrounding the US–Iran ceasefire longevity. Expected diplomatic talks between the US and Iran in Islamabad this weekend remain uncertain, with no official confirmation of delegates’ arrival on Friday.

Israel continues strikes on Hezbollah, despite Benjamin Netanyahu stating that Israel will soon begin direct negotiations with Lebanon. Meanwhile, US President Donald Trump said US forces will remain deployed around Iran until full compliance with the agreement is achieved.

Japanese stocks may face challenges amid rising expectations that the Bank of Japan (BoJ) could raise interest rates in April to stay ahead of inflation. Japan’s 10-year government bond yield climbed near 2.4% on Friday, close to its highest level since 1998. Yields have surged since the Middle East conflict began, as higher energy prices fueled inflation concerns and strengthened bets on tighter BoJ policy.

China’s Consumer Price Index rose 0.9% YoY in March, down from 1.3% in February and below the 1.2% consensus. On a monthly basis, CPI fell 0.7% after a 1.0% increase previously. Meanwhile, Producer Price Index rose 0.5% YoY, rebounding from a 0.9% decline and marking its first increase since September 2022, supported partly by higher energy costs amid disruptions in the Strait of Hormuz.

Asian stocks FAQs

Which are the main stock market indices in Asia?

Asia contributes around 70% of global economic growth and hosts several key stock market indices. Among the region’s developed economies, the Japanese Nikkei – which represents 225 companies on the Tokyo stock exchange – and the South Korean Kospi stand out. China has three important indices: the Hong Kong Hang Seng, the Shanghai Composite and the Shenzhen Composite. As a big emerging economy, Indian equities are also catching the attention of investors, who increasingly invest in companies in the Sensex and Nifty indices.

What are the main sectors represented in Asian stock markets?

Asia’s main economies are different, and each has specific sectors to pay attention to. Technology companies dominate in indices in Japan, South Korea, and increasingly, China. Financial services are leading stock markets such as Hong Kong or Singapore, considered key hubs for the sector. Manufacturing is also big in China and Japan, with a strong focus on automobile production or electronics. The growing middle class in countries like China and India is also giving more and more prominence to companies focused on retail and e-commerce.

What factors drive Asian stock markets?

Many different factors drive Asian stock market indices, but the main factor behind their performance is the aggregate results of the component companies revealed in their quarterly and annual earnings reports. The economic fundamentals of each country, as well as their central bank decisions or their government’s fiscal policies, are also important factors. More broadly, political stability, technological progress or the rule of law can also impact equity markets. The performance of US equity indices is also a factor as, more often than not, Asian markets take the lead from Wall Street stocks overnight. Finally, the broader risk sentiment in markets also plays a role as equities are considered a risky investment compared to other investment options such as fixed-income securities.

What are the risks of investing in Asia stock markets?

Investing in equities is risky by itself, but investing in Asian stocks comes along with region-specific risks to be taken into account. Asian countries have a wide range of political systems, from full democracies to dictatorships, so their political stability, transparency, rule of law or corporate governance requirements may diverge considerably. Geopolitical events such as trade disputes or territorial conflicts can lead to volatility in stock markets, as can natural disasters. Moreover, currency fluctuations can also have an impact on the valuation of Asian stock markets. This is particularly true in export-oriented economies, which tend to suffer from a stronger currency and benefit from a weaker one as their products become cheaper abroad.