Tech leads shares higher in Asia on AI demand; Wall Street futures edge up
Bond markets remain tense after a vicious sell-off
[SYDNEY] Share markets edged higher in Asia on Monday (Sep 21) as AI’s insatiable demand for data buoyed chipmakers, and oil eased as hopes Saudi Arabia could boost supplies offset news of a Houthi attack on Riyadh.
Trade was thin with Japan on its Silver Week holiday through to Wednesday, leaving the US dollar steady at 157 yen with investors wary in case the Bank of Japan took advantage of the lack of liquidity to intervene in support of its currency.
The yen jumped on Friday after Japanese authorities conducted rate checks in the currency market, the Nikkei newspaper reported.
Japan’s Nikkei was shut but futures rose 0.5 per cent, while South Korea’s tech-heavy index gained 1.1 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.3 per cent.
S&P 500 futures firmed 0.3 per cent, while Nasdaq futures added 0.4 per cent. In Europe, Eurostoxx 50 futures and Dax futures both rose 0.2 per cent, while FTSE futures were flat.
Bond markets remained tense after a vicious sell-off saw US 2-year yields jump 36 basis points in the past two weeks to heights not seen since mid-2024 at 4.7604 per cent.
Hawkish guidance from the US Federal Reserve on Sep 16 has futures wagering on a 56 per cent chance it will hike rates again in October, with a move by year-end considered a done deal.
“Tightening cycles are generally front-loaded, and the Fed almost never stops after one hike,” wrote analysts at BofA in a note. “With nominal consumer spending up 6.3 per cent on the year, well above the 5 per cent level historically associated with above-target core inflation, the Fed has little choice but to restrain demand.”
“Thus, we are retaining our call for just two more hikes, in October and December.”
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Central banks in the EU, UK, Japan, Australia and New Zealand are also expected to tighten again by year end. The Swiss National Bank, Sweden’s Riksbank and Norges Bank hold policy meetings on Thursday, but all are seen holding steady for now.
Bonds have also been dogged 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.
The news kept the euro flat at US$1.1477, having shed almost 1 per cent last week as the US dollar gained broadly.
Oil prices held above US$100 as Iran and the US exchanged new threats and after the Houthis attacked Saudi Arabia’s capital. Brent was off 0.2 per cent at US$103.68 a barrel, while US crude dipped 0.3 per cent to US$100.02.
There were reports that Saudi Arabia was aiming to quickly restart some flows through its main east-to-west pipeline after it was damaged in attacks on Sep 10, though details were lacking.
“The closure of the East-West pipeline has materially altered the state of the oil market,” said Vivek Dhar, head of commodities at CBA.
“We now estimate that oil markets have five to 10 weeks before global oil and refined product inventories deplete, compared to estimates closer to 15 to 20 weeks just a fortnight ago.”
This would increase pressure on Washington to make a deal with Iran, at least to restore some flows through the Strait of Hormuz and keep the Bab el-Mandeb passage open, he added.
US President Donald Trump will be attending the United Nations General Assembly this week, ahead of a meeting with Chinese President Xi Jinping on Thursday.
In other commodity markets, the rise in yields hampered non-interest-paying gold, which eased 0.2 per cent to US$4,370 an ounce. REUTERS
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