Asian shares track Wall Street higher, Treasury yields stay high

Asian stocks climbed on Tuesday, following a tech-driven surge that pushed the Nasdaq to a new record high. Treasury yields remained elevated, hovering near multi-decade peaks. The euro stumbled near 17-month lows, pressured by growing fiscal worries in France. French government bonds suffered as investors sold them off due to an underwhelming budget and heightened political instability post-Spanish Prime Minister Pedro Sanchez's decision to call a snap election.

Brent crude hovered around $100 a barrel, following a slight drop of 1.9% the previous day, as Middle East exports surged and the Group of Seven nations promised to increase supplies. MSCI's Asia-Pacific index, excluding Japan, climbed 0.2%, while Japan's Nikkei rose 0.7%. European stock futures increased by 0.5%, with the Nasdaq futures up 0.2% and S&P 500 futures by 0.1%.

The Nasdaq hit a record close, driven by weaker-than-expected jobs data that decreased expectations of a Federal Reserve rate hike this month. AI giant Nvidia surged 2.1%, reaching a record-high closing price and reaching a market cap of $5.76 trillion. The market's rally continued to be led by tech, with easing interest rate uncertainty and a slight decline in geopolitical risk allowing investors to concentrate on the exceptional earnings growth provided by AI firms.

Goldman Sachs predicted a 27% increase in S&P 500 earnings for the third quarter, with more than half of that growth originating from companies benefiting from AI infrastructure spending. Latin American markets also rose, propelled by a strong performance by Brazilian stocks and the Brazilian real, after a right-wing senator, Flavio Bolsonaro, outperformed polls in the first round of the presidential election and advanced to a runoff against incumbent Luiz Inacio Lula da Silva.

The persistent rise in Treasury yields persisted even as markets reduced expectations of a Federal Reserve interest rate hike this month to 23% from 71% a week earlier, following top policymakers stressing the need for more data before further tightening. US 10- and 30-year Treasury yields hit fresh 24-year highs overnight, marking a steady climb since mid-August driven by inflation and debt concerns.

An ISM survey revealed that services businesses' input price inflation surged to the highest level in over four years. The 10-year Treasury yield was stable at 5.3089% in Asia, up 3 basis points to 5.3493%, the highest since 2002, while the 30-year yield remained at 5.6622%, briefly touching 5.7029% overnight. The drop in French bonds somewhat eased, with the premium investors required to hold French 10-year bonds over safer German debt narrowing to 137 basis points on Monday.

The euro lost ground to $1.1215, after falling as much as 0.8% to $1.116 overnight, its weakest level since May 2025. It traded at 177 yen, having been down for seven consecutive sessions, around the lowest since November last year. French political divisions raised the risk of diluted fiscal consolidation proposals or a potential no-confidence vote in the government, according to Joseph Capurso, head of international economics at the Commonwealth Bank of Australia.

The euro-dollar pair was likely to test support at 1.1109. The dollar index rose 0.9% over the week to 102.2. Gold remained unchanged at $4,141.31 an ounce.