Key facts
- Asian stocks declined, weighed down by chipmakers, while oil prices rose due to renewed Middle East tensions.
- The MSCI Asia-Pacific ex-Japan index fell 0.06%, and Japan's Nikkei slid 2.8%.
- Oil prices were on track for their largest weekly gains since April, with Brent crude up over 11% for the week.
- The U.S. initiated new strikes against Iran, escalating regional hostilities.
- Investors are pricing in fewer Federal Reserve rate hikes by December following recent inflation data.
- The Japanese yen remained near a 40-year low against the dollar.
Asian stocks experienced a volatile start on Friday, with declines in chipmaker stocks weighing on the broader market and global equity indexes. This weakness persisted despite strong earnings from some semiconductor firms like TSMC, as investors rotated into sectors such as banking. The MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.06%, while Japan's Nikkei slid 2.8%. Futures for the Nasdaq, S&P 500, and EUROSTOXX 50 also indicated a weaker open for European and U.S. markets.
Oil prices, however, were on the rise and set for their largest weekly gains in three months. Brent crude futures rose 0.7% to $84.83 a barrel, and U.S. crude advanced 0.7% to $79.49 per barrel. This surge was driven by renewed hostilities in the Middle East, with the U.S. Central Command announcing new strikes against Iran aimed at degrading its military capabilities. Both Brent and U.S. crude futures were on track to rise more than 11% for the week.
In currency markets, the U.S. dollar held steady, largely unchanged for the week, as receding expectations of Federal Reserve rate increases were offset by renewed safe-haven demand. Investors are now pricing in approximately 27 basis points of Fed hikes by December, following cooler U.S. CPI and PPI data. The euro was little changed at $1.1442, and sterling fetched $1.3472. The Japanese yen, however, continued to languish near a 40-year low, trading at 162.38 per dollar, prompting intervention warnings from Japanese officials. Spot gold saw a modest increase, up 0.4% to $3,985.64 an ounce.
Trade tensions also resurfaced, with the U.S. imposing new 25% tariffs on Brazil. Analysts at HSBC expressed concerns about potential overcapacity in the AI build-up, questioning the sustainability of the AI cycle. Meanwhile, South Korea announced a temporary ban on new listings of certain technology-focused ETFs to curb volatility.