HONG KONG – Global financial markets kicked off the trading week with divergent performance across Asian equities on Monday, as conflicting tailwinds from the booming global artificial intelligence sector and tentative progress in U.S.-Iran negotiations shaped investor sentiment.
Markets in Northeast Asia led regional gains, powered by a widespread rally in AI-linked assets that pushed Japan’s benchmark index to a new intraday all-time record. The Nikkei 225 closed 1.6% higher at 72,364.82, after touching an unprecedented peak of 72,831.73 during morning trading. SoftBank Group, the Japanese multinational investment giant with extensive exposure to AI startups and emerging technology, climbed 2.4% by closing bell, while leading chip equipment manufacturer Tokyo Electron gained 2.3% to extend its 2024 rally.
South Korea’s benchmark Kospi index also notched a solid gain, rising 0.4% to 9,084.37 to hold near its own all-time high. The advance was again led by AI-linked semiconductors, with top memory chip producer SK Hynix surging 4.7% on sustained demand expectations for AI server components. Across the Taiwan Strait, the Taiex index rallied 2.8%, while India’s Sensex added a more moderate 0.6% to close in positive territory.
Despite the strong upward momentum across much of Northeast and South Asia, some market analysts have sounded a note of caution. “We’re seeing another strong market today,” noted Neil Newman, managing director and head of strategy at Astris Advisory Japan. He warned that from a valuation perspective, the Japanese market is “probably getting a little stretched” at current levels, particularly against the backdrop of escalating geopolitical instability in the Middle East.
Regional performance was far from uniform. Hong Kong’s Hang Seng Index dropped 1% to 23,690.86, while Australia’s S&P/ASX 200 slipped a modest 0.1% to 8,822.80. Mainland China’s benchmark Shanghai Composite bucked the downward trend for major East Asian emerging markets, edging 0.2% higher to close at 4,098.01.
The biggest macro market mover of the day was newfound optimism around U.S.-Iran negotiations aimed at ending ongoing hostilities, which pulled global oil prices lower. International benchmark Brent crude fell 1.4% to trade at $79.42 per barrel on Monday, down sharply from levels seen earlier this year amid regional conflict. Before the outbreak of hostilities in late February, Brent traded at roughly $70 per barrel.
High-level diplomatic talks between U.S. and Iranian negotiators wrapped up in Switzerland early Monday, with lower-level technical discussions scheduled to continue through the rest of the week. While Tehran claimed it had shut down the Strait of Hormuz, a critical global chokepoint that carries roughly a fifth of the world’s daily oil and gas trade, over the weekend, U.S. officials confirmed that commercial shipping traffic through the waterway continued uninterrupted.
Even with the tentative progress toward a diplomatic resolution, commodity analysts warn that the path to a permanent peace deal remains fraught with risk. “Moving towards a more permanent deal will be challenging, with very real risks of a flare-up in hostilities,” ING commodities strategists Warren Patterson and Ewa Manthey wrote in a client note released Monday.
Across the Atlantic, U.S. stock futures pointed to a lower opening on Wall Street as investors turned their attention to upcoming inflation data that will shape Federal Reserve monetary policy expectations. The U.S. Bureau of Economic Analysis is set to release May’s personal consumption expenditures (PCE) price index – the Fed’s preferred inflation gauge – this Thursday, with investors parsing the data for clues about the timing of potential interest rate cuts.
In currency markets, the U.S. dollar appreciated slightly against the Japanese yen, rising to 161.68 yen from 161.22 yen in Friday trading. The euro edged lower to $1.1454, down from $1.1473 at last week’s close.
Associated Press senior producer Mayuko Ono in Tokyo contributed reporting to this article.