Markets opened with renewed risk appetite as hopes for a de-escalation of the Iran conflict prompted rallies in both equities and bonds. The move higher followed comments from U.S. President Donald Trump that the United States could stop military attacks on Iran within two to three weeks and that Tehran would not need to strike a deal for hostilities to wind down.
Asia-Pacific shares outside Japan registered a sharp advance, with MSCI's broadest index in the region rising 4.3%. That gain snapped a four-day slide and positioned the benchmark for its largest one-day increase since the post-Liberation Day rebound on April 10. South Korea led regional strength as the Kospi climbed as much as 7.7% after official data showed exports in March far exceeded market expectations.
Supporting the move in Seoul, a separate purchasing managers' index revealed South Korea's factory sector expanded at the fastest rate in more than four years in March, a pace driven by semiconductor demand and the introduction of new products. Other export-dependent economies within the technology supply chain such as Japan and Taiwan also took part in the advance. Japanese corporate sentiment data indicated an improvement in business mood in March.
The rally continued despite a Wall Street Journal report that the United Arab Emirates may join the conflict and is lobbying for a United Nations Security Council resolution to permit participation in military action to force open the Strait of Hormuz. In addition, U.S. Foreign Secretary Marco Rubio said Washington will need to reexamine its relations with NATO after the war ends.
Investors are preparing for a televised update from President Trump at 9 p.m. on Wednesday. Meanwhile, S&P 500 e-mini futures were up 0.2% on Wednesday morning, reflecting some spillover optimism on Wall Street following a robust session on Tuesday, when traders priced in the possibility of a diplomatic or operational exit ramp from the conflict.
Commodity markets were more measured as trading resumed in Asia. Brent crude futures rose 1.2%, reclaiming some of the prior session's losses but remaining relatively subdued compared with the equity moves. Early European futures pointed higher: pan-region futures were up 1.8%, German DAX futures increased 1.8%, and FTSE futures gained 0.9%.
In another market milestone, Greece is set to rejoin MSCI's developed market index from May next year, a development the index provider says marks a milestone in the country's recovery 13 years after it was removed from the benchmark.
Key economic events and supply schedule to watch on Wednesday
- France: HCOB Manufacturing PMI for March
- Germany: HCOB Manufacturing PMI for March
- United Kingdom: S&P Global Manufacturing PMI and BBA Mortgage Rate for March
- Euro zone: HCOB Manufacturing Final PMI for March, unemployment rate for February
- United States: Retail sales for February, ISM manufacturing PMI for March, weekly EIA inventories
- Debt auction: Germany to sell 7-year government debt
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