Tech leads shares higher in Asia, oil eases

Asia's share markets edged higher on Monday as demand for data-driven AI pushed up chipmakers, while oil prices eased due to hopes of increased supplies from Saudi Arabia offsetting news of a Houthi attack on Riyadh. Trading was thin in Japan during its Silver Week holiday, leaving the dollar steady at 157.00 yen. The yen rose after Japanese authorities conducted rate checks.

The Nikkei was closed, but its futures rose 0.5 per cent. South Korea's tech-heavy index gained 1.1 per cent, and MSCI's Asia-Pacific index outside Japan increased 0.3 per cent.

The S&P 500 futures rose 0.3 per cent, and Nasdaq futures added 0.4 per cent. In Europe, EUROSTOXX 50 and DAX futures rose 0.2 per cent, while FTSE futures were flat. Bond markets remained tense after a sharp sell-off pushed US 2-year yields to a two-week high of 4.7604 per cent. Hawkish Federal Reserve guidance led to a 56 per cent chance of another rate hike in October and a year-end hike considered likely. The Fed's tightening cycle is front-loaded, rarely stopping after one hike.

With nominal consumer spending up 6.3 per cent year-on-year, above the 5 per cent level associated with above-target core inflation, the Fed has little choice but to curb demand, according to BofA analysts. They maintain their call for just two more rate hikes in October and December. Central banks in the EU, UK, Japan, Australia, and New Zealand are expected to tighten further by year-end. The Swiss National Bank, Sweden's Riksbank, and Norges Bank are holding policy meetings but are seen maintaining rates for now.

Bonds have been affected by deficit concerns, with French debt risk premiums spiking to their widest since the euro zone debt crisis. German debt could face pressure later on Monday following Chancellor Friedrich Merz's conservative party's worst election results since 1949, keeping the euro steady at $1.1477. Oil prices stayed above $100, following Iran-US threats and the Houthi attack on Riyadh.

Brent dropped 0.2 per cent to $103.68 a barrel, while US crude fell 0.3 per cent to $100.02. Reports suggest Saudi Arabia may quickly resume some flows through its damaged East-West pipeline, but details are unclear. The closure of the pipeline has significantly reduced oil market reserves, with estimates now indicating 5 to 10 weeks before depletion, compared to 15 to 20 weeks earlier.