Asian stock indices jumped on Monday morning as market participants predicted that the US and Iran will extend the ceasefire by 60 days. In Japan, the Nikkei 225 Index jumped by 2.85%, extending the gains made last week and reaching a record high. It was trading at 65,110 yen, up by 76% in the last 12 months.
The same rally happened in South Korea, where the blue-chip Kospi Index jumped to KRW 7,847, a few points below the all-time high of 8,048 KRW. It has soared by over 200% in the last 12 months and is the best-performing global benchmark this year.
In China, the Shanghai Composite Index jumped by over 1%, while Hong Kong’s Hang Seng Index jumped by 0.86%.
The same trend happened in Europe and the United States, where futures tied to key benchmarks like DAX, CAC 40, Stoxx 50, IBEX, and Dow Jones continued their recent uptrend.
This rally was triggered by the weekend events in which President Donald Trump announced a potential deal with Iran that prevented an attack as most analysts were expecting. The media has reported that the deal will lead to a 60-day ceasefire that will allow the two sides to negotiate a good deal.
Still, there are concerns that a deal that satisfies the two sides remains far off. Besides, the current ceasefire has lasted 47 days, and they have not made any tangible progress in this period.
A deal between the two countries would benefit stock indices like the Hang Seng, Nikkei 225, and Kospi. For one, it would lead to lower crude oil prices, which would reduce inflation in the respective countries. Indeed, Brent and the WTI indices dropped below $100 on Monday.
It would also lower global bond yields as investors pare back their interest rate hike expectations. Indeed, bond yields retreated slightly on Monday. In Japan, the ten-year yield fell to 2.716% from this month’s high of 2.81%. Similarly, in South Korea, the yield fell to 4.14% from a high of 4.3%. The same trend is happening in the US, where the short and long-term yields pulled back further.
Still, these indices faces a major risk: a deal has not been announced yet. This means that Trump may as well decide to launch an attack in the coming days. Such an attack would aim at bringing the Iranians to the negotiating table.
Trump is already being criticized for being a TACO (Trump Always Chickens Out). For one, he has constantly threatened to attack Iran only to pare back his expectations. A good example was last week, when he threatened an attack only to back down.
Meanwhile, Asian stocks are also rising because of the ongoing artificial intelligence hype. A closer look shows that companies in the AI industry are among the best gainers as focus shift to the upcoming IPOs by companies like SpaceX and OpenAI.
Softbank stock jumped to a record high of 7,150 yen, up by 115% from its lowest point this year. It is a major investor in OpenAI, which plans to go public soon. Some of the other top gainers in the Nikkei 225 Index today were Taiyo Yuden, Murata Manufacturing, Lasertec, and Fujikura.
Other top AI companies like Samsung and SK Hynix were among the best gainers in Asia as demand for their products jumped.