Yields rise across Asia amid global bond selloff

Asian equities slipped on Tuesday, as investors turned cautious over the Federal Reserve's interest rate outlook and rising Middle East tensions, while closely watching China and South Korea's robust economic data. U.S. stock futures held steady in Asian trading, but a spike in oil prices sparked worries about inflation and the likelihood of tighter U.S. monetary policy.

The Nikkei 225 in Japan edged down 0.2%, while Japan's TOPIX index rose 0.5%. South Korea's KOSPI fell 0.4%. South Korean exports surged 68.7% in August, beating expectations for a 62.6% increase, highlighting ongoing global demand for technology products, especially semiconductors linked to the AI boom. Chinese shares were mixed, with the Shanghai Composite and CSI 300 trading flat, while Hong Kong's Hang Seng fell 1.2%.

China's private-sector manufacturing activity expanded in August, providing some reassurance for regional market sentiment. Meanwhile, Australia's S&P/ASX 200 dropped 0.4%, and Singapore's Straits Times Index declined 0.7%. India's Nifty 50 futures fell 0.1%. The overall market sentiment remained tentative after renewed U.S.-Iran hostilities drove Brent crude above $90 a barrel, raising concerns that elevated energy prices could keep inflation high, complicating the Fed's policy outlook.

A 66% chance now exists that the Fed will raise rates at its September meeting, following hawkish comments from Chair Kevin Warsh at the Jackson Hole symposium. Higher U.S. interest rates could weigh on Asian equities by boosting Treasury yields and the dollar. Regional tech stocks were particularly scrutinized after Shein's IPO in Hong Kong underperformed, while Nvidia announced a $3.5 billion investment in MediaTek, propelling the Taiwanese firm's shares upward.