- S&P 500 futures slide, Nikkei and Kospi extend retreat.
- Dollar gains as market narrows odds on Fed rate.
- The Fed chair will testify this week, US CPI in focus.
SYDNEY: Stock markets fell in Asia on Monday as fighting intensified in the Gulf and Iran claimed to have closed the vital Strait of Hormuz, sending oil prices sharply higher and reviving inflation risks globally.
The dollar rose with bond yields as investors narrowed the odds of a rate hike by the Federal Reserve, just a day before Chairman Kevin Warsh is to meet Congress for the first time in his new role.
June inflation figures on Tuesday may show some cooling in the headline rate of 4.2% as gasoline prices fall, although some of that will reverse now that oil is rising again.
Brent crude rose 4.1% to reach $79.11 a barrel. barrel, up from a recent low of $70.14, while U.S. crude rose 4.1% to $74.37 a barrel. barrel.
US officials said about 20 vessels had been escorted through the strait in the previous 24 hours, although ship tracking sites showed little traffic moving.
Equity investors will be hoping that the earnings season proves as upbeat as expected with the big banks starting on Tuesday, while Netflix and General Electric are also on the way.
“The technology continues to screen high in our models, supported by prominent earnings growth/momentum and attractive valuations,” analysts at Citi wrote in a note.
“While AI volatility may remain elevated in the coming quarter, we maintain our overweight position on global IT and the US,” they added. “We pair these growth exposures with overweights in cyclical regions/sectors including Japan, financials and materials.”
S&P 500 futures fell 0.4%, while Nasdaq futures lost 0.9%. In Europe, EUROSTOXX 50 futures and DAX futures both fell 0.6%, while FTSE futures fell 0.1%.
Japan’s Nikkei fell 1.6% after falling 1.7% last week, while MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.9%.
Testing the chip bubble
South Korea’s previously red-hot market fell 5.4% and will be in focus after losing nearly 8% last week as leveraged bets on semiconductor stocks came under pressure.
The market has emerged as an important global barometer of sentiment in the chip sector, and further losses could ripple out more broadly.
South Korean chip maker SK Hynix’s US-listed shares rose nearly 14% in their Nasdaq debut on Friday. News that Apple had sued OpenAI and two former employees for theft of trade secrets emerged after markets closed.
Analysts at BofA warned that the AI capex boom was eroding cash generation, with hyperscalers spending $234 billion this year and forward free cash flow expected to turn negative for the first time since at least 2007.
“On that basis, many overlooked areas offer significantly better value,” they warned in a note.
The rise in oil pushed 2-year Treasury yields US2YT=RR to the highest since early 2025 at 4.2393%, while Fed Fund futures 0#FF: fell 2 ticks, implying a 39 basis point tightening of policy by the end of the year.
That again kept the dollar index steady at 101.13. The euro fell a fraction to $1.1394 as Europe is far more dependent on foreign oil than the US
The dollar added 0.2% on the yen to 162.03, regaining some ground lost on Friday when Japanese Finance Minister Satsuki Katayama floated an idea to encourage the $1.8 trillion Government Pension Investment Fund (GPIF) and other pension vehicles to bring some of their money home.
“The GPIF currently splits 50/50 between domestic and offshore, and a shift back even to the pre-pandemic norm closer to 60/40 would come with a large JPY buying flow,” said Taylor Nugent, senior economist at NAB.
“However, it is worth noting that while allocations can theoretically be revised at any time, they tend to be slow and the FY26 investment plan is already in place.”
The pound fell 0.2% to $1.3379 ahead of a pivotal week in British politics as Andy Burnham is expected to be formally anointed as Labor leader on Friday and appointed Prime Minister on July 20.
In commodities markets, the rise in yields weighed on non-interest-bearing gold, which fell 1.1% to $4,076 a barrel. ounces.
