Asian shares trade mixed as markets eye oil prices, US bonds, and currency fluctuations

Asian shares were trading mixed early Thursday as investors assessed the recent volatility in oil prices and the U.S. bond market. The Nikkei 225 in Japan rose 1.3% to 65,883.41 after some chipmakers benefited from heightened interest in artificial intelligence. However, Australia's S&P/ASX 200 slipped 0.7% to 8,700.50, while Hong Kong's Hang Seng dipped 0.5% to 24,715.95, and Shanghai Composite fell 0.8% to 3,902.33. Trading was absent in South Korea for the Chuseok autumn harvest holiday.

The benchmark U.S. crude dropped 0.82% to $91.40 a barrel, while Brent crude declined 0.83% to $102.22 a barrel. The Brent price remains substantially higher than pre-Iran War levels, sparking anxiety that the conflict could lead to persistent oil scarcity in the Middle East. Diplomats continue to engage in negotiations between U.S. and Iranian officials, but no substantial progress has been made thus far.

Wall Street took a hit when the U.S. bond market reacted aggressively to an unexpectedly robust economic report, raising concerns about inflation. The S&P 500 slipped 0.8% after finishing the prior day 0.4% below its record set last month. The Dow Jones Industrial Average declined 352 points, or 0.7%, and the Nasdaq composite fell 1.1% from its own all-time high.

The yield on the 10-year Treasury surged to 5.10%, up from 4.96%, a significant move for the bond market. The high yields act against stocks and other investments and also slow the economy by making borrowing more costly for everyone.

The 10-year yield briefly touched 5.14% on Wednesday, reminiscent of 2007 before the global financial crisis, which saw yields plummet. Yields have been rapidly escalating due to worries about high inflation, the U.S. government's substantial debt, and other concerns. The Federal Reserve's decision to raise short-term interest rates for the first time in three years amplified inflation worries. Fed Governor Michael Barr suggested that additional hikes may be necessary to bring inflation down to the Fed's 2% target.

Although the Bank of Japan recently increased its benchmark interest rate to curb the decline of the Japanese yen, the move was anticipated weeks ago. Consequently, the yen has not rebounded strongly. For oil-importing Japan, a weak yen is a negative factor when oil prices are skyrocketing. In currency trading, the U.S. dollar edged lower to 157.94 Japanese yen from 158.30 yen, while the euro remained at $1.1382. The S&P 500 closed at 7,706.03, the Dow Jones dropped to 51,511.59, and the Nasdaq composite fell to 26,936.04.