Asian Stocks, Bonds Decline as Crude Oil Advances: Markets Wrap

(Bloomberg) — Asian stocks fell with bonds and gold as rising oil prices stoked inflation concerns and expectations for tighter monetary policy, fueling a risk-off tone across markets.

MSCI’s Asia Pacific equities gauge dropped 1.7%, with decliners outnumbering gainers four to one. All 11 subgroups of the regional benchmark retreated. Benchmark indexes in Japan and South Korea both slid at least 2.8%.

Brent jumped 2% to about $96.50 a barrel as escalating fighting between the US and Iran heightened the risk of disruptions to oil flows through the Strait of Hormuz. The commodity has surged about 60% this year.

Rising oil prices pressured bonds, pushing global yields to the highest since 2008, as traders increased bets the Federal Reserve will raise interest rates. Treasury 10-year yields rose one basis point Wednesday to 4.81%, the highest level since late 2023.

Australian bonds extended losses, with yields on the 10-year note climbing as much as seven basis points to 5.25%, the highest level since July 2011. New Zealand government debt also declined, with traders pricing in a near-certain interest rate hike by the central bank later Wednesday.

The renewed surge in energy prices is compounding inflation concerns already fueled by government spending and heavy corporate borrowing to finance the artificial-intelligence buildout. Traders now put the odds of a rate hike this month at more than 50% for five major central banks, as investors assess whether rising oil prices and bond yields will deepen pressure on stocks and other assets.

“This morning session’s weak sentiment is clearly driven by the challenging combination of renewed Hormuz worries and rising global bond yields,” said Homin Lee, a senior macro strategist at Lombard Odier Singapore Ltd. “We still think this is just part and parcel of a volatile boom phase, with higher beta markets exhibiting wilder swings.”

Lee said he is still maintaining a constructive view on Asia Pacific markets, especially those in North Asia, as “the underlying earnings picture is solid.”

Gold, which becomes less attractive as interest rates rise, dropped 0.5% to around $4,330 an ounce after falling almost 6% over the previous three days.

Bitcoin dropped 0.6% to about $77,000.

In stocks, Dell Technologies Inc. bucked the overall downbeat tone, jumping 8% in extended trading after raising its annual sales forecast. Tech remained in focus with Nvidia Corp. said to be in advanced talks to acquire artificial intelligence startup Hugging Face in a $14 billion deal.

Meanwhile, the US military said it completed the strikes, even as Iran said it launched a missile attack on a US air base in Jordan. President Donald Trump earlier said the US strikes were in retaliation for Iran’s attempt to mine the strait and an earlier attack on a military base in Jordan.

The exchange followed weeks of relative calm, during which the Trump administration had shifted from military action toward economic pressure on Tehran. Neither side has shown much appetite to resume talks since an interim peace deal collapsed.

The renewed tensions are adding to Wall Street’s challenges as a global bond rout deepens. Federal Reserve Chair Kevin Warsh’s Jackson Hole speech last week also fueled expectations for tighter monetary policy, with markets now assigning about a 70% probability to a September rate increase.

Swaps have almost fully priced in a European Central Bank hike on Sept. 10 and assign a 58% probability to a Reserve Bank of Australia increase on Sept. 29. Markets are fully pricing in a Bank of Japan move on Sept. 18.

“Bond yields were already rising and the renewed US-Iran attacks and their impact on oil prices have made investors more concerned about bonds,” said Rajeev De Mello, global macro portfolio manager at Gama Asset Management. “At these levels, higher yields are clearly a headwind to Asian equities, especially longer duration tech stocks.”

Corporate Highlights:

Apple Inc. Chief Executive Officer John Ternus touted the company’s strong product pipeline and teased a “phenomenal” iPhone launch next week in his first remarks to employees as their new leader. Anthropic PBC is releasing a new version of its powerful Fable AI model that it says is better at coding and science tasks, as well as more economical — all changes it says are in response to customer feedback. Some of the main moves in markets:

Stocks

S&P 500 futures were little changed as of 10:43 a.m. Tokyo time Nikkei 225 futures (OSE) fell 2.6% Japan’s Topix fell 2.2% Australia’s S&P/ASX 200 fell 1.1% Hong Kong’s Hang Seng fell 0.7% The Shanghai Composite fell 0.7% Euro Stoxx 50 futures fell 0.3% Currencies

The Bloomberg Dollar Spot Index was little changed The euro fell 0.1% to $1.1579 The Japanese yen was little changed at 160.34 per dollar The offshore yuan was little changed at 6.7254 per dollar Cryptocurrencies

Bitcoin fell 0.6% to $76,946.04 Ether fell 0.9% to $2,398.6 Bonds

The yield on 10-year Treasuries advanced one basis point to 4.81% Japan’s 10-year yield was unchanged at 3.010% Australia’s 10-year yield advanced six basis points to 5.24% Commodities

West Texas Intermediate crude rose 1.9% to $91.96 a barrel Spot gold fell 0.4% to $4,310.34 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Aya Wagatsuma and Alice French.

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