Key facts
- Asian stocks rose on Thursday, driven by U.S. tech companies' capital spending plans.
- Oil prices surged to six-week highs due to escalating Middle East tensions.
- Rising oil prices renewed inflation concerns, pushing U.S. Treasury yields to 17-week highs.
- Alphabet and Tesla's earnings reports indicated continued strong spending on AI infrastructure.
- South Korea's KOSPI and Japan's Nikkei saw significant gains.
- The Japanese yen weakened against the dollar, nearing a 38-year low.
Asian stocks rose on Thursday, with gains bolstered by U.S. technology firms announcing significant capital spending plans that are expected to benefit regional chipmakers. Concurrently, escalating conflict in the Middle East propelled oil prices to a six-week high.
The surge in oil prices has reignited concerns about inflation, leading to a rise in short-term U.S. Treasury yields as traders anticipate potential earlier interest rate hikes by the Federal Reserve. Brent crude futures climbed 2% to $96 per barrel following new U.S. strikes on Iran and Houthi attacks on oil tankers in the Red Sea, exacerbating a conflict that has impacted global markets.
Analysts noted that the prolonged conflict has depleted global oil stockpiles and contributed to worldwide inflation. The potential closure of key shipping routes like the Strait of Hormuz and Bab el-Mandeb could disrupt over a quarter of the world's oil and gas transport.
Earnings reports from tech giants like Alphabet and Tesla indicated sustained investment in AI infrastructure. Alphabet, for instance, increased its capital expenditure forecast for the year to between $195 billion and $205 billion. This spending is anticipated to benefit Asian chipmakers, with South Korea's KOSPI index, led by SK Hynix and Samsung Electronics, rising over 3%, and Japan's Nikkei up 1%.
MSCI's broadest index of Asia-Pacific shares outside Japan saw a gain of about 1%, positioning it for a 3% weekly rise and ending a two-week losing streak. Experts highlighted that strong cloud growth validates increased AI capital expenditure, suggesting the hyperscaler spending cycle remains robust.
In currency markets, the Japanese yen remained under pressure, trading near 163.1 per dollar. It had previously slipped to its lowest level since December 1986. Traders are monitoring for potential intervention from Japanese authorities, although strategists suggest that a fundamental shift in the yen's role would require the Bank of Japan to accelerate its rate hike pace.
The U.S. dollar strengthened due to safe-haven flows and increased expectations of a Federal Reserve rate hike, with traders pricing in 42 basis points of hikes this year.