Global stocks steady as US-Iran talks, AI keep market on edge

Global shares were steady as U.S. markets reopened after a public holiday, while oil prices fell ahead of nuclear talks between the U.S. and Iran due to begin later on Tuesday.

Futures tracking the tech-heavy Nasdaq in the U.S. slipped 0.5%, suggesting that the retreat from artificial intelligence heavyweights may be far from over.

"The markets are taking each sector one-by-one and stress testing their business models to see how resilient they would be to AI disruption," said Axel Botte, head of market strategy at Ostrum Asset Management.

A monthly Bank of America survey showed global investors were increasingly worried that companies are over-investing.

In Europe, the pan-European STOXX 600 index rose 0.2%, marking a second consecutive day of gains, while the MSCI all-country index was flat.

"For years, fund managers were selling European assets, which benefited the U.S. That trend is done and is now reversing," Botte added.

ASIA SENTIMENT MUTED

Asian markets were also cautious, with the Nikkei down 0.4% in Japan, where the economy grew an annualised 0.2% in the fourth quarter, far below the 1.6% gain forecast as government spending dragged on activity.

The yen strengthened on Tuesday, leaving the dollar down 0.4% at 153.51 yen. The Japanese currency has gradually picked up after hitting its weakest level since July 2024 in late January, as investors fretted that Prime Minister Sanae Takaichi's plans for heavy spending to revive the economy could hurt the government's long-term finances.

"The market has likely assumed that softer GDP data in the fourth quarter will encourage PM Takaichi's plans to offer additional fiscal support and reduce the sales tax on food," NAB analysts wrote in a research note.

The 20-year JGB yield fell 5.5 basis points to 3.025%. The 30-year yield slipped 6 basis points to 3.025%, as bond prices rose.

Markets in China, Hong Kong, Singapore, Taiwan and South Korea were closed on Tuesday for Lunar New Year holidays.

The dollar index, which tracks the U.S. currency against six others, was mostly steady at 97.12, after a 0.2% overnight gain.

INVESTORS CAUTIOUS ON US-IRAN TALKS

Brent futures were down 0.5% at $68.14 a barrel ahead of U.S.-Iran talks in Geneva aimed at de-escalating tensions against a backdrop of expected OPEC+ supply increases, after gaining 1.33% on Monday. 

U.S. West Texas Intermediate crude was up 0.35%, paring earlier gains. This included all of Monday's price action as the contract did not settle that day due to the U.S. holiday.

"The market remains unsettled by geopolitical uncertainties, with investors cautious due to the pending U.S.-Iran and Ukraine negotiations this week," ANZ analysts said.

"If tension in the Middle East eases or meaningful progress is made on the Ukraine war, the risk premium currently built into oil prices could swiftly unwind."

Gold was down 0.82% at $4,950 an ounce, while spot silver was 1.6% lower.

(Additional reporting by Scott Murdoch in Sydney; Editing by Kim Coghill, Saad Sayeed and Alexander Smith)