MSCI Asia ex-Japan index up 1%
Oil nurses 3% overnight drop
TSMC profit beats market expectations
(Updates prices)
Asian stocks made their biggest gains in a month on Thursday, while the dollar took a breather and bond markets steadied as investors stepped back to assess the interest rate outlook.
Oil found support following its sharpest fall in two-and-a-half months on demand worries and the lack, so far, of an obvious Israeli or U.S. response to Iran's weekend attack on Israel.
Analysts do not expect dramatic new sanctions on oil from Iran, which comprises about 3% of global output.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 1% led by a 2% gain in South Korea's Kospi .KS11 and a 1% rise for Hong Kong's Hang Seng .HSI . All of those indexes are down for the week and for the month so far.
Japan's Nikkei .N225 rose 0.3%, though its drop of 3.6% for the week has it eyeing its biggest weekly fall since 2022.
S&P 500 futures ESc1 bounced 0.4%, Nasdaq 100 futures NQc1 rose 0.5%, FTSE futures FFIc1 rose 0.3% while European futures STXEc1 were flat.
The dollar has eased from recent highs and news of an unusual trilateral agreement between the U.S., Japan and Korea to consult closely on foreign exchange left the door open to intervention to slow any further dollar gains in Asia.
U.S. short-term interest rate expectations were little changed but selling of longer-dated bonds abated, and Asia's bond markets rallied on Thursday. Ten-year Japanese government bond yields JP10YTN=JBTC fell 2 basis points to 0.86%.
Ten-year Treasury yields US10YT=RR fell 1.6 bps to 4.569% and two-year Treasury yields US2YT=RR , which touched 5% on Thursday, were last at 4.92%.
"I believe (falls in yields and the dollar) are small pullbacks from extended moves," said Anshul Sidher, global head of markets at ANZ in Singapore, adding traders are closely watching bonds and the dollar to drive the mood.
"I'd expect (oil) to be range bound subject to (Middle East) escalations from where we are now," he said.
Taiwanese chipmaker TSMC 2330.TW turned in a positive surprise, beating market estimates with a 9% rise in profit as it rides a wave of artificial-intelligence led demand. It expects business to pick up in the second half and the result contrasted with Wednesday's disappointing earnings from chipmaking supplier ASML ASML.AS .
DOLLAR PAUSE Nervousness in the equity markets has followed a wave of bond selling and dollar buying as sticky U.S. inflation and a shift in tone at the Federal Reserve pointed to persistently high U.S. rates. The rates-sensitive Nasdaq .IXIC is down 3% so far this week.
The euro EUR=EBS is under pressure as European policymakers are readying to cut rates in two months time, though at $1.0680 it is off this week's five-month lows.
The Australian dollar AUD=D3 took a slight knock from data showing an unexpected fall in Australian employment in March before steadying around $0.6446.
The yen JPY=EBS traded at 154.32 per dollar, close to a three-decade low, and traders are eyeing a breach of 155 as a possible trigger for intervention.
"China is likely to welcome an end to yen depreciation," said Bank of Singapore strategist Moh Siong Sim in a note to clients.
"We believe the issue of whether Japan will intervene to limit yen weakness will matter to the People's Bank of China's assessment of the appropriate level to stabilise the (yuan)."
China's yuan CNY=CFXS hovered at 7.2357 per dollar. It is down 1.8% against the dollar this year and the weakening of its trading band this week has been taken as a signal that Chinese authorities will tolerate further softness.
In other commodity markets, European gas prices TRNLTTFMc1 have retreated from three-month highs and sharp rallies in metal prices have paused, though not reversed.
Three-month London copper CMCU3 is up 12% this year and traded at $9,584 per tonne overnight. Singapore iron ore SZZFc1 held gains at just over $110 a tonne.
Gold XAU= is just below last week's record high at $2,376 an ounce.
A handful of U.S. and European central bankers speak later on Thursday. U.S. jobless claims data is due and earnings at Blackstone BX.N and Netflix NFLX.O will be closely watched.
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