Asian equity markets rose on Monday as artificial intelligence’s demand for data helped chipmakers gain ground. Trade was light with Japan closed for a holiday, leaving the US dollar steady at 157 yen as investors waited for potential market intervention by the Bank of Japan. The yen jumped on Friday after authorities conducted rate checks in the currency market, according to the Nikkei newspaper.
Tech stocks and Fed outlook
Japan’s Nikkei was shut, but futures rose 0.5 per cent. South Korea’s tech-heavy index climbed 1.1 per cent, and MSCI’s broadest index of Asia-Pacific shares outside Japan increased 0.3 per cent. On Wall Street, S&P 500 futures gained 0.3 per cent and Nasdaq futures added 0.4 per cent. European markets also posted gains, with Eurostoxx 50 and Dax futures both up 0.2 per cent, while FTSE futures were flat.
Bond markets stayed tense after a sell-off pushed US 2-year yields to heights not seen since mid-2024. The yield climbed 36 basis points in the past two weeks to 4.7604 per cent. Futures now wager on a 56 per cent chance the Federal Reserve will hike rates again in October. With nominal consumer spending up 6.3 per cent on the year, analysts at BofA wrote that the Fed has little choice but to restrain demand. They are retaining a call for two more hikes in October and December.
Central banks in the EU, UK, Japan, Australia and New Zealand are also expected to tighten again by year-end. Bond markets have also been affected by deficit worries, with the risk premium on French debt spiking on Sep 18 to its widest since the euro zone debt crisis. German debt could come under pressure later on Monday after Chancellor Friedrich Merz’s mainstream conservative party suffered its worst election results since 1949. This news kept the euro flat at US$1.1477, after it shed almost 1 per cent last week.
Oil markets and geopolitical risks
Oil prices held above US$100 as Iran and the US exchanged new threats, following a Houthi attack on Saudi Arabia’s capital. Brent crude was off 0.2 per cent at US$103.68 a barrel, while US crude dipped 0.3 per cent to US$100.02. Reports indicate Saudi Arabia is aiming to quickly restart flows through its main east-to-west pipeline after it was damaged in attacks on Sep 10. “The closure of the East-West pipeline has materially altered the state of the oil market,” said Vivek Dhar, head of commodities at CBA. He now estimates that global oil and refined product inventories will deplete in five to 10 weeks, compared to 15 to 20 weeks just a fortnight ago.
This timeline shift would increase pressure on Washington to make a deal with Iran, at least to restore some flows through the Strait of Hormuz. US President Donald Trump will attend the United Nations General Assembly this week, ahead of a meeting with Chinese President Xi Jinping on Thursday. Gold eased 0.2 per cent to US$4,370 an ounce as the rise in yields hampered non-interest-paying assets.