Shrugging off war, the bond rout and oil crunch: Why Wall Street keeps rallying

Asian stock markets slipped on Wednesday, unable to capitalize on Wall Street's historic surge that pushed the S&P 500 and Nasdaq to all-time highs. The cautious trading occurred despite record-breaking performances on U.S. markets, driven by technology and AI-focused stocks. The decline was attributed to surging oil prices and elevated bond yields, which dampened investors' enthusiasm.

Japan's Nikkei 225 dropped nearly 1%, while South Korea's KOSPI fell 1.2%, with major chipmaker SK Hynix (KS:000660) shedding more than 2%. Samsung Electronics (KS:005930) saw a 0.6% decrease. Hong Kong's Hang Seng and India's S&P/ASX 200 closed slightly lower. Investors were wary of rising bond yields, which currently sit around 5.3% for the U.S. 10-year Treasury and exceed 5.6% for the 30-year yield.

Higher yields often make equities less appealing, especially in emerging markets, as they increase the discount rate applied to future earnings. Meanwhile, oil prices breached the $101 per barrel mark for Brent crude and neared $90 for U.S. West Texas Intermediate, fueled by concerns over Middle East supply disruptions linked to attacks by Iran-backed Houthi forces.

This inflationary pressure raised doubts about central banks' capacity to ease monetary policy. Australia's S&P/ASX 200 and Singapore's Straits Times Index remained flat. Indian markets awaited the Reserve Bank of India's decision on its policy rate, with a 25-basis-point hike to 5.50% widely anticipated. The RBI had held rates steady at 5.25% for four meetings after a 125-basis-point cut in 2025.

Investors also awaited the minutes from the Federal Reserve's September meeting and speeches from key policymakers, as they focused on whether robust corporate earnings could mitigate the impact of higher energy costs and global borrowing expenses.