Asian stocks experienced a decline as renewed geopolitical tensions in the Middle East led to higher oil prices, rekindling inflation concerns and strengthening expectations for further monetary tightening. The MSCI Asia Pacific Index fell 0.2%, with equity benchmarks in South Korea and Japan seeing declines. The S&P 500 Index also dropped 0.3% on Monday, although U.S. chip stocks advanced, notably after Nvidia announced a $3.5 billion investment in MediaTek.
Brent crude extended its gains in early Asian trading, surging to over $91 a barrel due to the renewed conflict in the Middle East. This escalation dimmed prospects for normal shipping through the Strait of Hormuz, maintaining elevated oil prices and contributing to inflation worries. Rising energy costs also put pressure on Treasuries, pushing yields on the 10-year U.S. Treasury three basis points higher to 4.75% during the New York session, marking its highest level since January 2025. Japan's 10-year benchmark yield approached 3%, a level not seen since 1996.
Money markets have increased their bets on a September interest rate hike by the U.S. Federal Reserve. This follows Federal Reserve Chair Kevin Warsh's hawkish comments at Jackson Hole last week, where he underscored his commitment to tackling inflation. Upcoming economic data, including Friday's jobs report and the September 11 consumer price data, are now under intense scrutiny, as they are expected to play a crucial role in determining the Fed's next policy move.
Shares of Taiwanese chipmaker MediaTek soared nearly 10% following Nvidia's announcement of a $3.5 billion investment. This investment, made through convertible bonds, is Nvidia's largest direct investment outside the U.S. and is seen as a significant endorsement of MediaTek's strategic shift towards AI chips. In other company news, fast-fashion giant Shein fell over 9% on its long-awaited Hong Kong trading debut after raising $1.7 billion in its IPO.
