Asian Stocks Advance on Tech Rally; Oil Prices Retreat

Asian share markets started the week on a positive note, led by a rally in technology stocks fueled by investor enthusiasm for artificial intelligence. Meanwhile, oil prices edged lower on reports that Saudi Arabia could increase supplies, offsetting geopolitical tensions in the Middle East.

Market Snapshot

Trading activity was muted as Japanese markets were closed for the Silver Week holiday, which lasts until Wednesday. Despite the closure, Nikkei futures saw a 0.5% gain.

Key regional indexes moved higher, according to data from Reuters:

• South Korea’s tech-heavy KOSPI index gained 1.1%.
• MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.3%.

The positive sentiment extended to Western markets, with S&P 500 futures up 0.3% and Nasdaq futures adding 0.4%. In Europe, EUROSTOXX 50 and DAX futures both climbed 0.2%.

Oil and Currencies

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Oil prices retreated but remained above the $100 per barrel mark. Brent crude fell 0.2% to $103.68 a barrel, and U.S. crude dipped 0.3% to $100.02. The slight decline came amid reports that Saudi Arabia was working to restart flows through a key pipeline, though this was balanced against news of a Houthi attack on Riyadh.

In currency markets, the dollar held steady against the yen at 157.00. Investors remain watchful for potential intervention by the Bank of Japan, particularly during the low-liquidity holiday period. The Nikkei newspaper reported Friday that Japanese authorities had conducted rate checks, a precursor to possible market action.

Bond Market Tensions

Government bond markets remain under pressure following a recent selloff. U.S. 2-year Treasury yields have surged 36 basis points in the past two weeks to 4.7604%, a level not seen since mid-2024. This follows hawkish guidance from the U.S. Federal Reserve, with futures markets now pricing in a 56% probability of another rate hike in October.

Analysts at BofA noted that the Fed is unlikely to pause its tightening cycle. "With nominal consumer spending up 6.3% on the year... the Fed has little choice but to restrain demand," they wrote in a note, maintaining their forecast for two more hikes in October and December.