Asian bonds, including those in Australia and New Zealand, rose, with 10-year yields falling at least three to six basis points, mirroring a climb in Treasury futures. This uplift was attributed to declining oil prices, specifically Brent crude heading for its longest losing streak in a year, dropping 0.5% to 1.2% to around $98-$98.80 a barrel. The fall in oil prices was fueled by progress in diplomatic efforts between the US and Iran, which eased inflation concerns and pressure on bond yields after they had reached multi-decade highs earlier in the month. Cash Treasuries did not trade in the Asian session due to a Japan holiday.
Asian equities, after an initial surge, saw momentum wane. MSCI’s Asia Pacific equity index climbed 0.1% overall, though it had gained as much as 0.5% earlier in the day. The early advance was driven by a rally in US chipmakers and the Nasdaq 100 hitting a record high, particularly with Meta Platforms Inc.'s new Muse AI agent and Shopify Inc. shares jumping 7.1% due to a partnership. However, an early advance in Asian stocks, fueled by gains in chipmakers, lost some ground as Hong Kong technology shares retreated. The Kospi Index in South Korea, a bellwether for AI investments, gave up gains of as much as 1.9% to edge up 0.2%, and a gauge of technology shares in Hong Kong fell around 1%, with Alibaba Group Holding Ltd. sliding more than 4%.
Traders were largely focused on geopolitical developments, especially regarding Iran and their impact on oil prices and inflation, as well as an upcoming meeting between the US and Chinese presidents that will address tariffs and commercial tensions. With a thin economic data calendar, developments around oil and international diplomacy were seen as crucial for potential further drops in oil prices and easing pressure on bond yields. Chris Weston, head of research at Pepperstone Group Ltd., noted that semiconductors and memory remained central to the equity conversation. Concerns also emerged that Meta’s Muse AI agent could negatively impact consumer-facing industries, including major banks, insurers, and online travel stocks, by disrupting businesses reliant on consumer inertia.
Conversely, US financial stocks faced downward pressure due to concerns that AI could erode margins and fees at financial brokerages. S&P 500 futures were largely unchanged, while Australia’s S&P/ASX 200 showed little change or a 0.2% rise. Hong Kong’s Hang Seng fell 0.8%, and the Shanghai Composite also dropped 0.4%. Euro Stoxx 50 futures indicated modest gains of 0.2% to 0.4%.
Separately, a strong US economic report raised inflation worries, causing US stocks to slide, with the S&P 500 down 0.8%, the Dow Jones Industrial Average down 0.7%, and the Nasdaq Composite falling 1.1% from its all-time high. The yield on the 10-year Treasury jumped to 5.11%, reaching 2007 levels, as oil prices halted their slide in the US market.
