Australia

The Australian share market is set for a flat open amid concerns from US investors over escalating tensions between Washington and Tehran.

The SPI200 futures contract was up three points, or 0.04 per cent, to 6767.0 at 8am Sydney time on Wednesday, after losses of almost two per cent for oil majors Exxon Mobil Corp and Chevron Corp kept the blue-chip Dow Jones Industrial Average in the red.

Equity markets have been trying to shake off concerns from escalating tensions between Washington and Tehran after the killing of an Iranian military commander by the United States last week.

The benchmark S&P/ASX200 index closed Tuesday up 90.7 points, or 1.35 per cent, to 6,826.4 points - its best day in three weeks.

The Dow Jones Industrial Average fell 0.42 per cent, the S&P 500 lost 0.28 per cent, and the Nasdaq Composite dropped 0.03 per cent.

The ASX's Rate Indicator showed that the market's odds of a rate cut have grown steadily in the last two weeks, and traders predicted there is a better than 50-50 chance the Reserve Bank will cut rates on 4 February.

Meanwhile the Australian dollar was buying 68.68 US cents, down from 69.17 US cents when the ASX closed on Tuesday.

Asia

China’s benchmark index closed at its highest level in more than eight months on Tuesday, resuming a rally prompted by hopes of a brighter trade outlook and more policy support, as worries over Middle East tensions eased.

The Shanghai Composite index ended 0.69 per cent higher at 3,104.80, its highest close since 25 April 2019.

The country’s blue-chip CSI300 index gained 0.75 per cent to its highest close since 5 February, 2018. Its financial sector sub-index added 0.61 per cent, the consumer staples sector rose 2.15 per cent, the real estate index gained 0.85 per cent and the healthcare sub-index jumped 1.4 per cent.

Hong Kong’s main Hang Seng index finished firmer on Tuesday, lifted by tech firms as global investors took a breather from concerns over Middle East tensions, with new data pointing towards a stabilising global economy.

At the close of trade, the Hang Seng index was up 95.87 points or 0.34 per cent at 28,322.06. The Hang Seng China Enterprises index rose 0.3 per cent to 11,198.75.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 0.69 per cent, while Japan’s Nikkei index was up 1.60 per cent. 

Europe

A rally in chip stocks helped German and Italian shares strengthen on Tuesday while gains in other European bourses were curbed by nervousness amid tension between the US and Iran.

Semiconductor stocks tracked their US peers higher as Microchip Technology raised its third-quarter sales outlook. The technology index rose 1.3 per cent, the most among European sub-sectors.

A more than 4 per cent gain for Infineon Technologies helped Germany's DAX rise 0.8 per cent while STMicroelectronics's 2.5 per cent gain lifted Italian stocks by 0.6 per cent.

The pan-regional STOXX 600 index finished a volatile session 0.2 per cent higher after falling in the past two sessions following the killing of a top Iranian commander in Baghdad last week by the US.

The benchmark index is 0.4 per cent below its record high hit on 27 December .

Oil prices surrendered some of their recent gains, pressuring London's energy-heavy FTSE 100 index.

Auto stocks also shone after British carmaker Rolls-Royce marked a 25 per cent jump in 2019 sales, giving some comfort to a sector that has been plagued by slowing global demand.

Shares of Rolls-Royce owner BMW rose 1.6 per cent.

On the other hand, luxury British carmaker Aston Martin plunged about 16 per cent after it warned its 2019 profits would almost halve due to weak European markets.

The stock was the biggest loser on the London's mid-cap index.

Spanish stocks lagged as Socialist leader Pedro Sanchez secured parliamentary backing by a tight margin to form a coalition government, following two inconclusive national elections last year.

But without a solid majority in parliament, the coalition may struggle to pass legislation and will need to negotiate with other parties on a case by case basis.

North America

Wall Street’s major indexes declined on Tuesday as investor caution persisted amid the US-Iran standoff, and energy shares fell as oil prices gave back some recent gains.

Exxon Mobil Corp and Chevron Corp declined with oil prices, which had rallied in recent days on escalating tensions between Washington and Tehran following the killing of a top Iranian military commander by the US last week.

Chipmakers gained and helped to limit market losses, especially in the Nasdaq. The Philadelphia Semiconductor index rose 1.8 per cent with Micron Technology Inc gaining 8.8 per cent after brokerage Cowen & Co upgraded the chipmaker to “outperform.”

Equity investors have been jittery since late last week, when a US drone strike killed Iranian Major General Qassem Soleimani, taking major indexes off record highs.

Major US companies begin reporting fourth-quarter results next week, with S&P 500 earnings forecast as of Tuesday to have declined 0.6 per cent in the quarter from a year ago, according to IBES data from Refinitiv.

The Dow Jones Industrial Average fell 119.7 points, or 0.42 per cent, to 28,583.68, the S&P 500 lost 9.1 points, or 0.28 per cent, to 3,237.18 and the Nasdaq Composite dropped 2.88 points, or 0.03 per cent, to 9,068.58.

Among gainers, Boeing Co shares climbed 1.1 per cent after it said it was recommending that airline pilots undergo simulator training before they resume flying the 737 MAX, a shift from its previous position that pilots only needed computer-based training on new software following two fatal crashes.

Also, Microchip Technology Inc rose 6.7 per cent after raising the midpoint of its third-quarter sales forecast.

Apache Corp soared 26.8 per cent after it made a major oil discovery, with France’s Total SA, off the coast of Suriname.

On the economic front, data showed new orders for US-made goods fell in November, pulled down by steep declines in demand for machinery and transportation equipment.

However, a reading on non-manufacturing sector activity for November came in better than expected.