Asian equities opened mixed on Wednesday as investors remained cautious while weighing rising tensions around Iran and awaiting key economic data. Japan's Nikkei 225 rose 0.56% to 66,227.55 by midday break, recovering from earlier declines, while the broader Topix gained 0.61% to 4,118.44, as reported by Reuters. MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.12% in early trading, set for a 2% rise in the month. However, Nasdaq 100 futures fell around 0.3% as investors trimmed exposure ahead of Nvidia's earnings report, while European futures were flat in Asian hours. The trend follows mixed investor sentiment as easing crude oil prices and a drop in US Treasury yields supported markets, though prevailing uncertainty over the US-Iran peace deal continue to weigh on sentiment. Market breadth on the Nikkei was positive, with 150 stocks advancing compared with 70 decliners, while five stocks were unchanged, according to Reuters.
Japanese shares edged higher on Wednesday as investors turned cautiously optimistic ahead of Nvidia's quarterly earnings, with semiconductor stocks leading gains. SoftBank Group, a major investor in the AI sector, climbed 2.71%, helping support the broader market recovery. Mitsubishi Materials was the best-performing Nikkei stock, rising 7%, followed by Dowa Holdings, which gained 4.85%, and Tokyo Electric Power, up 4.71%. Among other major stocks, Taiyo Yuden fell 3.88%, while Sumco declined 3.73% and Nichirei dropped 2.55%. Market breadth was relatively balanced, with 439 of the 907 traded stocks advancing and 429 declining, with foreign investors being net sellers of shares worth 509.3 billion won. Investors were also focused on the US Personal Consumption Expenditures price index for July, the Federal Reserve's preferred inflation gauge, which was due later on Wednesday, as reported by Reuters.
Oil prices declined to a one-week low as traders shrugged off the latest US sanctions campaign against Iran, with Brent crude futures falling more than 2% to $86.41 a barrel on Wednesday, as reported by Business Standard. The retreat in oil prices offered significant relief to markets after persistent inflation and elevated yields had weighed on risk appetite. Both benchmarks had lost more than 3% on Tuesday before the latest developments. As reported by The Economic Times, Iran and Oman discussed 'a joint temporary navigational corridor' through the strait and agreed to clear it of mines. The two countries have been in on-and-off talks for weeks about controlling traffic through the waterway, which handled one-fifth of global oil and liquefied natural gas shipments before the war began in February. US treasury yields dropped for the second straight day as traders weighed the implications of US Treasury Secretary Scott Bessent's decision last week to expand Treasury buybacks, providing additional market stability. J.P. Morgan analysts noted that while there was no real progress or details of the Iran-Oman deal, price action suggested markets are quickly pricing in optimism around an interim announcement.
Investors turned cautious ahead of Nvidia's second-quarter earnings later in the day, with their focus on whether the massive AI spending boom is sustainable and can turn profits that will satisfy markets. According to Business Standard, Nvidia is approaching the point where beating expectations is expected, so the headline numbers alone may not determine the market reaction. Charu Chanana, chief investment strategist at Saxo in Singapore, pointed out that options data hints at a smaller move after earnings compared to previous profit announcements, suggesting Nvidia's results are becoming somewhat more predictable. Analysts expect Nvidia to forecast an 82.8% rise in third-quarter sales to $104.20 billion with adjusted gross margin for the second and third quarters expected to remain around 75%. J.P. Morgan analysts said it was likely that Nvidia's earnings release will be 'supportive of the AI trade though perhaps without giving a material near-term boost' to the semiconductor sector. The artificial intelligence trade remained in focus during a week set to be shaped by earnings from chip bellwether Nvidia, with Alibaba Group's HK$80 billion (US$10.2 billion) share sale to compete for global AI leadership keeping attention on the tech sector. Wall Street's main indexes ended higher overnight ahead of Nvidia's results, due after the U.S. market close on Wednesday, with investors closely watching for signs of continued strength in the artificial intelligence sector.
Investors were also focused on the US Personal Consumption Expenditures price index for July, the Federal Reserve's preferred inflation gauge, which was due later on Wednesday, as reported by Reuters. The data follows an unexpected decline in US nonfarm payrolls and broadly in-line consumer inflation, developments that have tempered expectations of a Federal Reserve rate hike in September. A softer-than-expected PCE reading could further reduce expectations of a near-term Fed rate increase and provide additional support to equities, according to Reuters. With Nvidia's results and U.S. inflation data both in focus, investors are likely to look for signals on the strength of the AI-driven rally and the outlook for U.S. monetary policy, factors that could influence Japanese and broader global markets in the coming sessions. The combination of AI earnings expectations and Fed policy signals has created a complex backdrop for Asian markets as investors seek clarity on both technological innovation and monetary policy direction.
