GLOBAL MARKETS: Asian shares fall, yen and Treasuries rise as AI, Iran concerns weigh

Dour sentiment persisted in the Asian trading day on Friday as concerns about technology company valuations weighed on shares and Middle East tensions kept energy markets on edge.

Japanese shares followed Wall Street lower after what appeared to be glowing results from AI sector bellwether Nvidia failed to impress investors. The yen and U.S. Treasuries rose, while gold held steady after a two-day advance.

An Omani mediator of U.S. and Iran nuclear talks gave an optimistic readout over the latest round of negotiations, but uncertainty still hung over energy markets with no sign of a breakthrough that would avert potential U.S. strikes.

"AI and geopolitics remained front and centre for financial markets, prompting a retreat from risk assets and a shift towards safe havens," Mantas Vanagas, senior economist at Westpac Group, wrote in a note.

"With no major breakthroughs announced in the U.S.–Iran talks, crude markets remained in wait-and-see mode, continuing to price in a significant risk of military escalation between the two countries," he said.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was down 0.4%, while Japan's Nikkei stock index .N225 slid 0.8%.

Nvidia posted better-than-expected results for the January quarter on Wednesday and forecast current-quarter revenue above market estimates. But U.S. shares ended lower and the company's stock was flat in after-hours trading.

U.S. equity futures slid in Asian trading, with the S&P 500 E-minis EScv1 down 0.41% and the tech-heavy Nasdaq 100 E-minis NQcv1 dropping 0.36%.

"It seems 'the Street' simply wanted more, or perhaps just isn't prepared to chase the stock at its current lofty valuation," IG market analyst Tony Sycamore said about Nvidia's results in a note.

The dollar index =USD, which measures the greenback against a basket of currencies, rose 0.04% to 97.77, with the euro EUR= little changed at $1.1797.

The yen JPY= strengthened 0.2% to 155.86 per dollar. Sterling GBP= was steady at $1.3482.

The U.S. and Iran plan to resume negotiations over Tehran's nuclear program after consultations in their countries' capitals, Omani Foreign Minister Sayyid Badr Albusaidi said in a post on X after the day's meetings in Switzerland.

Any substantial move forward could curb chances for U.S. President Donald Trump to carry out a threatened attack on Iran that many fear could escalate into a wider war.

The yield on benchmark U.S. 10-year notes US10YT=RR fell 1.5 basis points to 4.002%. The 30-year bond US30YT=RR yield fell 1.3 basis points to 4.6565%.

Data in Japan showed cooling inflation in Tokyo and weaker-than-expected factory output, complicating the case for policy rate increases by the central bank. The data came on the heels of Prime Minister Sanae Takaichi putting forward two Bank of Japan board nominees who share her fiscally dovish mindset.

China's central bank said on Friday it will scrap the foreign exchange risk reserves for some forward contracts, a move that would reduce the cost of dollar buying.

The yuan notched its biggest annual gain against the dollar since 2020 last year, strengthening past the psychologically important 7-per-dollar level, and the upward momentum has continued into the new year.

In Britain, a by-election will be closely watched, as a defeat for the Labour Party could add to pressure on British Prime Minister Keir Starmer following criticism over several recent policy reversals.

Polls say the vote in Gorton and Denton, in northwestern England's Greater Manchester, is too close to call between Labour, populist Reform UK and the left-leaning Greens.

Spot gold XAU= fell 0.23% to $5,175.03 an ounce, while U.S. crude CLc1 rose 0.09% to $65.27 a barrel.

In cryptocurrencies, bitcoin BTC= fell 0.3% to $67,290.45 and ether ETH= declined 0.68% to $2,016.78.

-Rocky Swift/Reuters