Asia markets temper Iran deal optimism, BOJ hikes rates

SINGAPORE, June 16 (Reuters) – Asian stocks made cautious gains on ​Tuesday after a rally in the previous session on news of a U.S.-Iran peace deal, while investors assessed a ‌widely expected Bank of Japan rate increase to a 31-year high.

The Nikkei 225 (.N225), opens new tab jumped 0.6%, briefly crossing above the 70,000 mark to set an all-time peak after the Japanese central bank voted 7-1 to hike its benchmark policy rate to 1%, levels last seen in 1995. Against the dollar, the yen was flat at 160.31 ​yen.

Meanwhile, the Australian dollar was little changed after the Reserve Bank of Australia kept interest rates on hold as expected, with ​the currency 0.3% weaker at $0.70515.

S&P 500 e-mini futures were trading down 0.1% after fluctuating between gains and losses, ⁠while MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), opens new tab was up 0.4%, with Korean shares (.KS11), opens new tab rising 2%. Stocks in Hong Kong (.HSI), opens new tab weighed ​on the benchmark after weaker-than-expected retail sales and fixed-asset investment data from China.

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 finished at a three-month low overnight, reflected the cautious stance, with Brent crude futures sliding 0.3% to $82.96 a barrel. Shippers in Asia and Europe said rebuilding confidence in resuming transit through the Strait of Hormuz could take weeks.

While U.S. 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 programme, were left to be resolved in subsequent negotiations.”

Overnight on Wall Street, stocks and bonds rallied on optimism over the deal. The S&P 500 (.SPX), opens new tab jumped 1.7% and the Nasdaq Composite (.IXIC), opens new tab surged 3.1%, while the Dow Jones Industrial Average (.DJI), opens new tab and the STOXX 600 both closed at record highs.

Beyond geopolitics, traders are also awaiting a press briefing from Bank ​of Japan Deputy Governor Shinichi Uchida ​to explain the central bank’s ⁠decision, which Governor Kazuo Ueda will miss due to medical treatment.

“We do not anticipate any major changes to the Bank’s assessment of current conditions,” analysts from Mitsubishi UFJ wrote in a research note.

“We expect Deputy ​Governor Uchida’s press conference, including the rationale he presents for the rate-hike decision, will be based largely ​on Governor Ueda’s ⁠June 3 speech,” the note added. “Mr. Uchida is also likely to follow the governor’s remarks when discussing future policy decisions.”

The U.S. dollar index , which measures the greenback’s strength against a basket of six currencies, was up 0.1% at 99.75, firmly within the tight trading channel in which it has ⁠sat for ​the past three sessions.

The yield on the U.S. 10-year Treasury bond was up 0.8 ​basis point at 4.475%. Gold moved 0.4% higher to $4,324.32 an ounce.

In early European trades, pan-region futures were flat, German DAX futures were 0.2% lower and FTSE futures were ​down 0.1%.

In cryptocurrency markets, bitcoin fell 1% to $65,799.61, while ether slumped 2.9% to $1,762.15.