By Tom Westbrook
SINGAPORE (Reuters) - Asian stocks rebounded on Thursday and oil beat a retreat, as the United States and Iran backed away from the brink of further conflict in the Middle East and investors reversed their safety plays.
U.S. President Donald Trump responded overnight to an Iranian attack on U.S. forces with sanctions, not violence. Iran offered no immediate signal it would retaliate further to a Jan. 3 U.S. strike that killed one of its senior military commanders.
Japan's Nikkei <.N225> opened 1.6% higher, putting stocks back where they were on Tuesday. MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> rose 0.1%, following gains on Wall Street overnight.
Australian shares <.AXJO> added a percentage point, climbing to their highest mark for the year so far and sitting close to a record high hit in December.
"I think today is a bit of a relief rally," said Shane Oliver, Chief Economist at AMP Capital in Sydney.
"Yesterday, investors were fearing the worst, that this was the escalation now underway. The news overnight has been more along the lines that Iran pulled its punches and Trump is toning things down," he said. "Which is seen by investors as substantially reducing the risk of a war."
Investors quit the safe-haven Japanese yen
Oil now sits cheaper than it was before the killing of the Iranian commander, Qassem Soleimani, in Baghdad, a strike that raised fears of an escalating regional conflict.
It last traded steady at $1,556.98 per ounce.
SANCTIONS NOT STRIKES
Iran fired missiles at military bases housing U.S. troops in Iraq on Wednesday in response Soleimani's killing. But Trump said no Americans were hurt and made no direct threats of a military response in an address to the nation on Wednesday.
"Iran appears to be standing down, which is a good thing for all parties concerned and a very good thing for the world," he said. He announced economic sanctions on Iran without giving details.
Iranian Foreign Minister Mohammad Javad Zarif had earlier said the strikes "concluded" Tehran's response to the killing of Soleimani.
On Wall Street stocks rose, led by the Nasdaq <.IXIC> which added 0.67%, while the Dow Jones Industrial Average <.DJI> and the S&P 500 <.SPX> each rose roughly half a percentage point.
U.S. Treasuries, which had soared in the flight to safety a day ago also settled back, with yields on the benchmark 10-year U.S. Treasury note
The yen, which at one point on Wednesday traded at 107.63 per dollar, was at 109.19 and drifting weaker in early Asian trade.
(Reporting by Tom Westbrook in Singapore; Editing by Lincoln Feast.)
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Updated Date: Jan 09, 2020 07:07:13 IST