Asia report: Markets mixed as oil prices soften

7th Jan 2026 09:01

(Sharecast News) - Asia-Pacific markets traded mixed on Wednesday, with defence stocks pulling back after a two-day rally as investors appeared to look past the recent US attack on Venezuela and reassessed broader geopolitical risks.

Sentiment in the region was also influenced by renewed rhetoric over Greenland, after White House press secretary Karoline Leavitt said president Donald Trump and his team were considering "a range of options" to acquire the territory, including "utilizing the US Military."

Despite the uncertainty, US equities hit record highs overnight, brushing aside tensions linked to Venezuela.

Patrick Munnelly, market strategy partner at TickMill, said the "record-setting surge in global stocks hit a speed bump in Asia as markets showed signs of overheating after their rapid ascent," adding that Asian markets "retreated 0.6%, cooling off after their strongest start to a year ever recorded."

Tokyo leads declines in Asia

Japanese stocks led regional declines, with the Nikkei 225 falling 1.06% to 51,961.98 and the broader Topix down 0.77% at 3,511.34.

Losses were led by Tokyo Electric Power Co, which slid 7.28%, Sapporo Holdings, down 7.02%, and Inpex, which fell 5.3%, as investors rotated out of energy and defence-linked names.

Munnelly noted that "in Japan, stocks dropped by 1% following China's decision to impose export restrictions targeting the country," while "rising tensions between China and Japan dampened sentiment," particularly around goods "that could have military applications."

Mainland Chinese markets were little changed.

The Shanghai Composite edged up 0.05% to 4,085.77, supported by sharp gains in select technology and industrial stocks, including Anji Microelectronics, which surged 18.86%, Guangzhou Fangbang, up 12.57%, and China First Heavy Industries, which rose 10.1%.

The Shenzhen Component also added 0.05% to 14,030.56.

Munnelly said the geopolitical strain in the region "overshadowed the optimism fuelled by advancements in artificial intelligence and hopes for potential interest rate cuts by the Federal Reserve, which had previously driven global stocks to record-breaking levels."

Hong Kong equities retreated, with the Hang Seng Index slipping 0.94% to 26,458.95.

Declines were led by BYD, down 3.93%, Xinyi Glass, which fell 3.32%, and Alibaba Group, lower by 3.25%, weighing on the broader market.

South Korean stocks outperformed, with the Kospi rising 0.57% to 4,551.06.

Gains were driven by strong moves in smaller and mid-cap names, including Union Materials, which jumped 29.99%, Hyundai Autoever, up 26.44%, and Union, which gained 19.95%.

Australasian markets in the green

Australian markets edged higher, with the S&P/ASX 200 up 0.15% at 8,695.60, supported by mining stocks.

Lynas Rare Earths surged 14.52%, IperionX climbed 7.64%, and Nickel Mines rose 6.32%.

Sentiment was helped by domestic inflation data that came in below expectations, with the consumer price index rising 3.4% year on year in November, under Reuters' forecast of 3.7% and down from October's 3.8%.

Monthly inflation was unchanged, reinforcing signs that price pressures may be easing and reducing the near-term case for further interest-rate hikes.

Munnelly added that "nickel gave up some of its recent gains after achieving its biggest rally in over three years in London just a day earlier."

In New Zealand, the S&P/NZX 50 gained 0.38% to 13,715.02, led by Serko, up 3.53%, Fisher & Paykel Healthcare, which added 3.12%, and Sanford, up 2.66%.

Dollar relatively steady as oil prices soften

Currency markets were steady, with the US dollar down 0.08% on the yen to last trade at JPY 156.52, 0.03% lower against the Aussie at AUD 1.4838, and 0.11% weaker on the Kiwi at NZD 1.7268.

Oil prices softened, with Brent crude futures last down 0.36% on ICE at $60.48 per barrel, and the NYMEX quote for West Texas Intermediate falling 0.67% to $56.75.

Munnelly said oil prices "also retreated amid claims by former President Trump that Venezuela might transfer up to 50 million barrels of crude oil to the US," while adding that "attention now turns to upcoming US economic data, which could determine whether investor confidence will hold steady, even as traders largely brushed aside other geopolitical concerns, including those linked to Venezuela."

Reporting by Josh White for Sharecast.com.