(May 13): Equities trimmed declines as dip buyers stepped in following early weakness in chipmakers. Government bonds from Australia to Japan followed Treasuries lower after US inflation accelerated, fuelling speculation the US Federal Reserve will raise interest rates next year.
MSCI’s Asia Pacific equities gauge slipped 0.1%, clawing back losses of as much as 0.6%. Equity-index futures for the US and Europe extended gains after the White House said Nvidia Corp chief executive officer Jensen Huang would join President Donald Trump’s trip to China. The chipmaker’s shares rose more than 2% on an alternate trading platform on the news.
Bonds were also in focus after the faster-than-estimated rise in core US consumer prices. Japan’s 20-year bond yield breached its January peak to touch the highest level since 1997 as elevated energy prices add to inflation pressure. The rate-sensitive two-year Treasury yield held just under 4%, while its 30-year peer was within two basis points of this year’s high.
Elevated oil prices and mounting inflation risks are threatening to derail the rebound in equities from their war-driven lows, a rally fuelled by gains in semiconductor stocks and robust earnings from megacap technology companies. The run-up in chipmakers has already sparked calls for a pause due to concern valuations have risen too far, too fast on expectations that heavy spending on AI will translate into profits.
“Strong US CPI raises the possibility of a more hawkish stance from the Fed, with rising US yields seen as a headwind for equities,” said Kazunori Tatebe, the chief strategist of Daiwa Asset Management in Tokyo. “It’s concerning that this could intensify pressure on growth stocks, such as AI and semiconductors, which have been leading the market.”
Elsewhere, the pound held losses from Tuesday after UK Prime Minister Keir Starmer survived in his post despite a slew of ministerial resignations, which have so far failed to force his downfall. UK bonds had tumbled amid the political drama that’s adding pressure to a market already battered by the country’s fiscal issues.
See also: Asian stocks decline, led by Korea, oil climbs
Gold edged lower for a second day to about US$4,700 an ounce, after India, one of the biggest importers of bullion, raised import tariffs on the commodity in an attempt to defend its currency. The Indian rupee slid to a record low close of 95.63 per dollar on Tuesday.
Oil slipped after rising almost 8% over the past three sessions as a resolution to the Middle East conflict remains elusive, with Iranian exports showing further strain from a US Naval blockade of the Strait of Hormuz. Brent crude dropped 1.2% to around US$106.50 per barrel.
“The uncomfortable question hanging over the market is this: can corporate America continue to deliver strong profitability if elevated oil prices are here to stay,” Tim Waterer, the chief market analyst of KCM Trade, wrote in a note. “That lingering doubt is what’s giving traders real pause right now.”
See also: Oil climbs as US-Iran deadlock lifts bond yields
US inflation quickened in April on rising gasoline and grocery costs, exceeding wage growth in a double-whammy for already strained consumers. The CPI rose 3.8% from a year earlier, the most since 2023. The core gauge, which excludes food and energy, increased 2.8%.
“Inflation is roaring back — largely driven by stubbornly high oil prices — which will dominate the inflation story for the rest of the year as the conflict continues to unfold in the Middle East,” said Skyler Weinand at Regan Capital.
On the geopolitical front, President Trump said he would prioritise trade discussions during his summit with Chinese counterpart Xi Jinping this week, and downplayed the amount of attention they would devote to the Iran war.
Traders have ramped up wagers the yuan will strengthen in coming days in a bet that the meeting will support a trade truce between the nations.
Corporate news:
- Anthropic PBC is in early talks with investors to raise at least US$30 billion ($38.16 billion) in fresh financing, according to people familiar with the matter, setting the stage for what could be its largest funding round yet.
- Samsung Electronics Co and its labour union failed to reach a last-minute wage agreement, according to the Yonhap news service, heightening the risk of a strike that could disrupt operations.
- Cerebras Systems Inc is guiding prospective investors that it expects to price its initial public offering above the top of its marketed range.
- Pop Mart International Group Ltd reported slower sales growth for the first quarter, marking a deceleration from its rapid expansion last year amid waning momentum for its blockbuster Labubu toys.
Some of the main moves in markets:
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Stocks
- S&P 500 futures were little changed as of 12.17pm Tokyo time
- Nikkei 225 futures (OSE) rose 0.4%
- Japan’s Topix rose 1%
- Australia’s S&P/ASX 200 fell 0.5%
- Hong Kong’s Hang Seng fell 0.3%
- The Shanghai Composite was little changed
- Euro Stoxx 50 futures fell 1.5%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at US$1.1734
- The Japanese yen was little changed at 157.67 per dollar
- The offshore yuan was little changed at 6.7920 per dollar
Cryptocurrencies
- Bitcoin rose 0.4% to US$81,007.57
- Ether rose 0.4% to US$2,293.5
Bonds
- The yield on 10-year Treasuries was little changed at 4.46%
- Japan’s 10-year yield advanced 4.5 basis points to 2.590%
- Australia’s 10-year yield advanced four basis points to 5.07%
Commodities
- West Texas Intermediate crude fell 1.1% to US$101.08 a barrel
- Spot gold fell 0.5% to US$4,691.65 an ounce
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