Asian stocks experienced a mixed start to the new month, following a turbulent July characterized by investor concerns over massive capital spending on AI and the speed of returns. South Korea's KOSPI index, a key indicator for AI investments, plunged over 5% on Monday, partially reversing an 18% surge from Friday, due to a fresh wave of selling in AI-linked technology shares. Japan's Nikkei 225 also declined by 0.9% to 1%, influenced by a sharp rally in the Japanese yen after confirmed joint currency intervention measures by Japan and the U.S. Chinese markets, however, showed resilience despite a weak private-sector manufacturing survey.
The Japanese yen strengthened significantly, gaining as much as 1.4% to 155.23 per U.S. dollar, following coordinated intervention by Japan and the U.S. to prop up its value. This intervention, aimed at curbing the yen's slide from 40-year lows, has traders on alert for further actions. A stronger yen could help mitigate inflation in Japan but might negatively impact its exporters. Meanwhile, the U.S. dollar index fell 0.2%, largely due to the yen's appreciation.
Oil prices continued to slide, with Brent crude futures sinking by 4.7% to 7.3% to trade between $81.55 and $83.77 a barrel. This drop came after U.S. President Donald Trump indicated he would hold off on new strikes against Iran, instead pursuing a deal to reopen the Strait of Hormuz. Hopes for a peace agreement with Iran boosted overall stock markets, with the Dow Jones Industrial Average climbing 1.3% (693 points) to an all-time high, and the S&P 500 jumping 1.5%, just 0.1% shy of its record set earlier in the summer.
Treasuries rose across the curve, with the benchmark 10-year yield dropping four basis points to 4.69%, easing inflation concerns stemming from oil's decline. Gold also climbed as much as 0.5% to approximately $4,070 an ounce. European shares generally showed positive movement, with the German DAX reaching an intraday record and overall European stocks rising 0.4% to start August positively.
