Asian Stocks Drop as Oil Stokes Inflation Worries: Markets Wrap

(Bloomberg) — Asian stocks declined, tracking moves on Wall Street, as elevated oil prices stoked inflation concerns and technology shares came under renewed pressure.

MSCI’s Asia Pacific index for equities slipped 0.5%, with more than three shares declining for every one that advanced in the gauge. Benchmarks in Japan and South Korea fell, just as traders awaited markets in mainland China to return from a holiday.

Shares of Samsung Electronics Co. dropped 0.7% after fluctuating between small gains and losses earlier in the session. The chip bellwether reported a record profit, but still missed estimates.

Elsewhere, Brent rose 1.1% to around $101.30 a barrel after a report that the White House asked the Pentagon to draw up strike options against Iran that could be executed before the midterm elections, and as a storm shut some US output. Treasuries were a touch weaker, with the benchmark 10-year yield gaining one basis point to 5.29%.

Higher oil prices are complicating the outlook by adding to inflation pressures after the Federal Reserve raised rates last month, a move officials unanimously backed. US stocks have largely shrugged off higher rates and elevated oil prices to reach records, but earnings season from next week will test whether billions poured into the artificial intelligence buildout can deliver commensurate returns.

“Another rate hike is probably coming this year because current policy isn’t very restrictive,” said David Russell at TradeStation. “With inflation above target and most measures of economic activity strong, price stability is the Fed’s dominant mandate.”

All 19 Fed officials backed last month’s decision to raise the target range for the benchmark rate by a quarter point to 3.75% to 4%, the first increase since July 2023. The move came as policymakers saw signs of renewed strength in the economy.

Officials also discussed financial conditions, with many noting that even after the rise in longer-term Treasury yields, conditions remained supportive of growth as equities rallied and corporate bond spreads stayed narrow.

Attention is also shifting to the coming earnings season for signs that profit growth can justify elevated valuations as macro risks mount, and whether the artificial-intelligence boom has further to run.

Expectations have been rising, with earnings per share for S&P 500 companies projected to increase more than 24% in the coming reporting season, according to Bloomberg Intelligence.

The euro traded steady against the dollar as traders monitored France’s fiscal strains, which threaten to pull the European Central Bank into its sharpest confrontation with markets since the euro-area debt crisis. France’s finance ministry said it isn’t changing its bond-issuance strategy.

The market will keep pushing French spreads wider until it meets an official response strong enough to turn the tide. That will require cooperation from Berlin as well as Brussels, said Sean Keane, chief strategist for Asia Pacific at JB Drax Honore.

“France is now on everyone’s screen and Europe is widely viewed as having a set of intractable problems that it doesn’t have the institutional will or collective capability to address,” Keane said.

Corporate Highlights:

SK Hynix Inc.’s Solidigm has picked lead banks for its US initial public offering next year, according to people familiar with the matter. Broadcom Inc. is arranging more than $50 billion in financing for the custom artificial intelligence chip it’s developing with OpenAI, part of a surge in deals to pay for AI infrastructure, the Wall Street Journal reported. Some of the main moves in markets:

Stocks

S&P 500 futures were little changed as of 9:45 a.m. Tokyo time Hang Seng futures fell 0.6% Nikkei 225 futures (OSE) fell 1.3% Japan’s Topix fell 1.4% Australia’s S&P/ASX 200 fell 0.4% Euro Stoxx 50 futures rose 0.1% Currencies

The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1199 The Japanese yen rose 0.3% to 157.68 per dollar The offshore yuan was little changed at 6.7009 per dollar The Australian dollar fell 0.1% to $0.6955 Cryptocurrencies

Bitcoin fell 0.2% to $83,241.15 Ether was little changed at $2,571.1 Bonds

The yield on 10-year Treasuries advanced one basis point to 5.30% Australia’s 10-year yield declined three basis points to 5.38% Commodities

West Texas Intermediate crude rose 1.1% to $89.24 a barrel Spot gold fell 0.1% to $4,106.60 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Ruth Carson.

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