Asian stock markets experienced an upswing on Thursday, buoyed by a recovery in semiconductor shares following a period of significant sell-offs. However, the overall gains were tempered by a sharp increase in oil prices, which reignited inflation concerns amid renewed conflict in the Gulf region, adversely impacting bond markets.
Oil prices continued to rise for a third consecutive session after President Donald Trump announced that the temporary agreement with Iran aimed at halting the ongoing conflict was “over.” Additionally, the U.S. military conducted new strikes against Iran for the second day in a row to secure the Strait of Hormuz. Despite these developments, Trump later indicated that he did not foresee a return to full-scale war, which helped alleviate some market anxieties.
Brent crude futures saw an increase of 0.8%, reaching $78.65 per barrel, marking a weekly rise of 9% and surpassing $80 per barrel for the first time since June 22. This surge affected global bond markets negatively and heightened expectations that the Federal Reserve may need to implement interest rate hikes this year to control inflation. Current Fed fund futures suggest a potential tightening of 38 basis points this year, bringing them back to levels seen a week prior.
Initially, Wall Street reacted negatively to Trump’s remarks but later rebounded, with the Nasdaq achieving a modest gain of 0.2%. Chipmaker Nvidia saw a significant increase of 3.6% following reports that China intends to permit its leading AI companies to purchase a limited quantity of the firm’s H200 chips.
The MSCI index tracking Asia-Pacific shares outside Japan rose by 0.8%, while Japan’s Nikkei index increased by 2.3%, breaking a three-day slump. South Korea’s KOSPI surged by 3.8%, driven by a 3.6% increase in Samsung and a remarkable 7.5% rise in SK Hynix, as investors capitalized on the recent dip in tech stocks.
In Asia, Wall Street futures remained stable, while European stock futures experienced a rally of 0.9%. Chris Weston, head of research at Pepperstone, noted, “Currently, the market leans towards the belief that the situation in Iran will de-escalate, leading to renewed negotiations surrounding the Memorandum of Understanding.” He added, “However, traders need to stay open-minded as the situation remains fluid and predicting timing is particularly challenging.”
Minutes released by the Federal Reserve revealed concerns among policymakers regarding rising inflation. Some members expressed that there might already be grounds for increasing borrowing costs, although they ultimately concurred to maintain current rates last month.
The bond market sell-off intensified in Asia, with the yield on 10-year Japanese government bonds climbing by 1.5 basis points to 2.880%, the highest level since September 1996. Meanwhile, Australia’s 10-year government bond yields rose by 4 basis points to 4.924%, the highest since early June.
The benchmark 10-year U.S. Treasury yields increased by an additional 2 basis points to 4.5852% on Thursday after a 4 basis point rise the previous night, marking a total increase of 10 basis points for the week.
Currency market reactions were relatively subdued, with the dollar unable to sustain its yield support, declining by 0.2% to 162.38 yen, not far from its 40-year peak of 162.84, as traders remained cautious about potential Japanese government interventions. The euro edged up by 0.1% to $1.1428, and the British pound also rose by 0.1% to $1.3401, just below a three-week high of $1.341.
Gold prices remained stable at $4,079 per ounce.
