Asia shares downbeat on the week as bond yields, oil stay high

Asian share markets faced a downbeat start to the week as bond yields and high oil prices persisted. The United States Treasury resumed its climb in yields after a brief respite, despite Treasury Secretary Scott Bessent indicating he could increase government repurchases of Treasuries. Fiscal consolidation was also floated as a possibility, but analysts doubted whether enough spending cuts could be found to curb the budget deficit exceeding 6% of gross domestic product.

Steven Zeng, a strategist at Deutsche Bank, cautioned that markets would push back against the belief that fundamentals like record debt and large deficits were on their side. Further Treasury interventions could become too costly, he added. The strain from higher yields raised global debt costs, impacting tech giants' borrowing for AI capital expenditures and challenging stock valuations.

The Nikkei slipped 0.8%, resulting in a 4.4% loss for the week so far. South Korea and Taiwan both edged higher, but remained down on the week.

MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.5%. In Europe, EUROSTOXX 50 and DAX futures saw mild declines, while FTSE futures dipped 0.1%. On Wall Street, S&P 500 futures were up 0.1%, and Nasdaq futures gained 0.2%. Nvidia's earnings report loomed as a major hurdle for the AI sector. Walmart faced a 9% slide following a sales miss.

Bessent further expanded on President Donald Trump's pledge of economic warfare against Iran, promising the toughest sanctions in history on the country and dimming hopes for a deal to open the Strait of Hormuz. Brent oil prices hit a one-month high of US$94.71 before profit-taking, while US crude eased to US$86.18 a barrel. The dollar faced broad losses, driven by concerns about increasing US debt and policy uncertainties, which could erode its purchasing power.