Asian stocks retreated on Tuesday as investors turned their focus to central bank decisions, including an expected rate hike from the Bank of Japan, after a rally in the previous session on news of a US-Iran peace deal.Markets settled into a more measured tone on Gulf developments as the initial excitement over the preliminary agreement between Washington and Tehran began to fade.
Oil prices, which settled at a three-month low overnight, reflected the cautious stance, with Brent crude futures up 0.1 percent at US$83.25 a barrel. Shippers in Asia and Europe said rebuilding confidence in resuming transit through the Strait of Hormuz could take weeks.
MSCI's broadest index of Asia-Pacific shares outside Japan erased gains to trade flat after an initial rally, with stocks in Hong Kong .HSI weighing on the benchmark after weaker-than-expected retail sales and fixed-asset investment data from China. Japan's Nikkei 225 was down 0.3 percent, retreating from a record high as S&P 500 e-mini futures slipped 0.1 percent.
While US President Donald Trump's announcement of a deal with Iran drew initial investor relief on Monday, it also puts Washington on a collision course with Israel.
"While it is an important diplomatic breakthrough that should remove a key source of market volatility, the durability of the deal is likely to be tested in the future," Westpac analysts wrote in a research note. "Many sticking points, including the fate of Iran’s nuclear program, were left to be resolved in subsequent negotiations."
