Oil and geopolitics drive risk-off mood
Technology companies bore the brunt of a steep selloff in Asian shares on Tuesday, as an escalating Middle East conflict propped up crude prices and lent support to the greenback, with investors bracing for an earnings period that could shape market direction through year-end. Energy costs are again dictating the mood across global markets while traders assess events in the Middle East and the Russia-Ukraine war. Brent futures traded at $105.9 a barrel, close to a two-week peak, with oil swinging on supply concerns tied to strikes on Saudi Arabia and the possibility of more Russian diesel.[S1][S2][S3][S4][S5][S6]
Saxo's chief investment strategist in Singapore, Charu Chanana, observed that investors are being reminded that geopolitical events carry the greatest weight when they translate into higher inflation. According to her, the fresh climb in crude continues to weigh on bond yields and dims the appeal of richly valued growth shares, particularly given that the Russia-Ukraine energy ceasefire appears shaky and Middle East supply threats have not gone away.[S1]
Tech selloff spreads from Wall Street
Among equities, MSCI's broad Asia-Pacific gauge excluding Japan dropped 2% in early trade, while South Korea's technology-dominated KOSPI tumbled 6%. Japan's Nikkei lost 2.6% on its first session back after a public holiday. Capital.com senior analyst Kyle Rodda traced much of the weakness to the previous night's chipmaker-driven decline on Wall Street spilling into Asia. The Nasdaq had slipped 0.5% overnight as semiconductor names fell, with investors questioning how long the AI rally can last amid intensifying US-China rivalry.[S1][S2][S3][S4][S5][S6]
Rodda also noted that a further spike in crude, layered on top of positioning before inflation figures and corporate results, creates every condition for a risk-averse session across Asia. That wary mood kept the US dollar hovering close to an 18-month peak. The euro was last changing hands at $1.1157, and the yen stood at 158.50 against the dollar.[S1]
Bank earnings and bond yields in focus
Market participants will focus on this week's wave of US bank results for clues about how the recent climb in Treasury yields has affected dealmaking, loan growth and funding expenses across the sector. A damaging combination of energy-driven inflationary pressure and anxiety over swelling government debt has set off repeated bouts of bond selling in recent weeks, lifting borrowing costs to multi-decade peaks worldwide.[S1]
Four of the six biggest US lenders — JPMorgan Chase, Goldman Sachs, Citigroup and Wells Fargo — were due to publish results later in the day. Ameriprise Financial chief market strategist Anthony Saglimbene said the bank figures will be scrutinized for signs on whether households continue paying bills, borrowing and spending at healthy rates. He added that the third-quarter reporting period opens with equities near record levels and scant tolerance for misses, and that further gains would require corporate America to post strong grades and sustain that momentum through year-end.[S1]
During Asian trading hours, the benchmark 10-year yield eased 2.9 basis points to 5.214%, remaining within reach of the 24-year peak of 5.364% reached the prior week.[S1]
