Global equity markets kicked off mid-week with broad upward momentum across Asia on Wednesday, as a tech-fueled rally on Wall Street carried over into regional trading, even as mounting geopolitical tensions push crude oil prices to multi-month highs and stoke fresh inflation concerns.
The upward trend across most Asian benchmarks got an early boost from positive trade data out of Japan, where government figures showed both imports and exports recorded year-over-year increases last month. A sharp depreciation of the Japanese yen has inflated the converted value of dollar-denominated trade flows, pushing the country’s benchmark Nikkei 225 up 1.9% to close at 67,511.12. Elsewhere in the region, Australia’s S&P/ASX 200 gained 0.4% to settle at 8,830.60, while South Korea’s Kospi notched an impressive 4.6% jump to reach 7,061.36. Mainland China’s Shanghai Composite edged up nearly 0.5% to 3,882.95, while Hong Kong’s Hang Seng bucked the regional upward trend to dip 0.7% to 24,947.30.
The bullish momentum in Asian markets traces directly to a strong rally on Wall Street a day earlier, where artificial intelligence-linked stocks led broad gains after steep sell-offs the prior week. For a second consecutive trading session, semiconductor manufacturers and other tech firms positioned to benefit from the global AI boom led the market upswing. The S&P 500 climbed 0.9%, the Dow Jones Industrial Average gained 385 points, or 0.7%, and the tech-heavy Nasdaq composite rose 1.3%.
AI stocks have been the most volatile segment of global markets in recent weeks: after a months-long rally driven by explosive growth in AI investment and demand for AI-focused semiconductors and data center infrastructure, the sector pulled back sharply last week on concerns that valuations had risen too far, too fast. On Tuesday, however, the sector bounced back strongly. Micron Technology led the rebound, jumping 12.2% following its 13.3% drop the prior week, adding to a 1.9% gain from the prior session. Nvidia added 2%, and the two chipmaking giants were the single largest contributors to the S&P 500’s overall gain.
All market gains have come despite growing pressure from rising crude oil prices, which have climbed amid escalating military tensions between the United States and Iran. In early Wednesday energy trading, benchmark U.S. crude rose 85 cents to $85.19 per barrel, while international benchmark Brent crude climbed $1.04 to hit $92.05 per barrel, crossing the $91 threshold that has stoked new inflation worries among traders.
For major oil-importing economies like Japan, the combination of a depreciating domestic currency and spiking crude prices creates a dual economic shock. “Oil makes the situation more difficult because Japan imports most of its energy. A weaker yen and higher crude prices arrive together like two waves hitting the same seawall,” explained Stephen Innes, an analyst and former professional trader.
In currency markets, the U.S. dollar held steady at 163.14 Japanese yen on Wednesday, while the euro inched slightly higher to $1.1406 from $1.1404.
The run-up in oil prices comes at a particularly sensitive moment for global monetary policy, as it threatens to reverse recent declines in headline inflation that had raised hopes that central banks could begin rolling back tight interest rate policies. Persistently higher energy costs could force the U.S. Federal Reserve and other major central banks to keep interest rates elevated, or even implement additional hikes, which would slow global economic growth and put downward pressure on equity and asset prices.