Asia-Pacific markets experienced mixed trading Tuesday as investors processed President Trump’s declaration that the U.S.-Iran ceasefire was on “massive life support.” Despite these geopolitical tensions, major indices like Japan’s Nikkei 225 saw gains, while South Korea’s Kospi and Australia’s S&P/ASX 200 declined. Market experts noted a "show me" investor mentality, where resilience is driven by a conditioned tendency to buy market weakness and structural factors like retail flows into leveraged funds.
Asia-Pacific markets displayed a mixed performance on Tuesday as investors weighed new uncertainties surrounding the delicate U.S.-Iran ceasefire. President Donald Trump issued a stark warning, declaring the truce was on "massive life support," yet markets largely “shrugged off” the geopolitical jitters.
Trump’s comments on Monday cast a long shadow over the U.S.-Iran ceasefire, describing it as effectively "on life support." He cited Tehran’s "unacceptable response" to Washington's peace proposals for ending the ongoing conflict. “I would say the ceasefire is on massive life support, where the doctor walks in and says, 'Sir, your loved one has approximately a 1% chance of living,'” Trump stated.
Across Asia, Japan’s Nikkei 225 climbed 0.52% to 62,742.57, with the Topix adding 0.83% to 3,872.90. In contrast, South Korea's Kospi, after hitting a fresh record high on Monday, reversed course to fall 2.29% to 7,643.15, and the small-cap Kosdaq dropped 2.32% to 1,179.29. Australia’s S&P/ASX 200 saw a loss of 0.36%, closing at 8,670.70.
Bond markets also saw significant movement, with Japan’s 10-year government bond yields soaring to their highest level since 1997, reaching 2.545%. This surge followed the release of minutes from the Bank of Japan, indicating that some board members advocated for an imminent interest rate hike.
Meanwhile, Hong Kong's Hang Seng index experienced choppy trade, ultimately dipping 0.20%, and China’s CSI 300 saw a marginal decline of 0.09%. India’s Nifty 50 also dropped significantly by 1.21%.
Despite the escalation in geopolitical tensions, alongside higher oil prices and persistent inflation fears, global equities have demonstrated remarkable resilience. Jordan Rizzuto, CIO of GammaRoad Capital Partners, characterizes this market dynamic as a “show me” market. Investors, he noted, are increasingly reluctant to react to risks unless they manifest as tangible disruptions to economic or corporate fundamentals.
Rizzuto elaborated that investors, having navigated the pandemic, soaring inflation, aggressive rate hikes, and tariff anxieties in recent years, have grown accustomed to "buying market weakness" rather than retreating. He also pointed to structural factors amplifying the rally, including robust retail flows into leveraged exchange-traded funds and call options. This activity compels dealers to purchase underlying equities as hedges, which, in turn, expands buffer funds and hedged equity strategies, providing further downside protection.
In the U.S., futures markets remained largely positive. S&P 500 futures saw marginal gains, while Nasdaq 100 futures edged up 0.1%. Futures tied to the Dow Jones Industrial Average added 24 points, a rise of less than 0.1%.
Overnight, U.S. markets closed higher, with the S&P 500 advancing 0.19% to 7,412.84, buoyed by key tech stocks despite rising oil prices and Trump’s rejection of Iran's peace proposal. The Nasdaq Composite inched up 0.1% to 26,274.13, and the Dow Jones Industrial Average climbed 95.31 points, or 0.19%, to 49,704.47. Both the S&P 500 and Nasdaq Composite achieved new all-time intraday and closing records.
— CNBC’s Lim Hui Jie and Lisa Kailai Han contributed to this report.
