Global Bond Yields Fall, Korean Stocks Gain 0.26%, Yen Surges, Brent Oil Drops Over 1%

Asian stocks broadly rose on Thursday as global bond yields retreated and oil prices stabilized after three days of gains. Earlier, U.S. President Trump downplayed the likelihood of a prolonged U.S.-Iran conflict, easing market tensions. Meanwhile, the yen strengthened significantly, triggering speculation that Japanese authorities may intervene in the currency market.

The MSCI Asia Pacific Index rose 1.1%, rebounding from Wednesday's sell-off. Chip-related stocks such as SK Hynix led gains, buoyed by Broadcom's optimistic outlook for AI chip sales over the next two years. European stocks opened mixed, with Germany's DAX up 0.04% and Nasdaq 100 futures up 0.2%.

Brent crude prices edged lower to around $95.40 per barrel. Trump said U.S. military action against Iran may be short-lived and reiterated U.S. control of the Strait of Hormuz. The pullback in oil prices eased selling pressure on the Treasury market, with U.S. Treasuries extending the previous session's gains and the 10-year yield steady around 4.77%. Market focus now shifts to Friday's U.S. nonfarm payrolls report for clues on the Federal Reserve's monetary policy path.

Natalia Lojevsky, managing director at CIFC Asset Management, wrote in a note: "There are multiple unresolved issues and conflicts in the market, and none has a clear timeline for resolution. Investors need to be cautious when entering." She also warned, "At some point, persistently higher yields will cause real pain for equities."

European stocks opened mixed, with Germany's DAX up 0.04%, the UK's FTSE 100 up 0.12%, France's CAC 40 down 0.01%, and the Euro Stoxx 50 up 0.05%.

The Nikkei 225 closed down 0.2% at 64,214.48. The Topix closed up 0.5% at 4,102.04. South Korea's Seoul Composite Index closed up 0.26% at 6,579.48.

The yen strengthened for a second consecutive session, rising to 157.63 per dollar, a three-week high.

The dollar index fell 0.2% for a second straight day.

The U.S. 10-year Treasury yield was little changed at 4.77%.

Japan's 30-year JGB auction saw strong demand, with the 30-year yield earlier falling 10 basis points to 4.065%, and the 10-year JGB yield down 4 basis points to 2.970%.

Gold rose 1.2% to around $4,430 per ounce.

Brent crude fell 1.0% intraday to $94.67 per barrel. WTI crude fell 1.5% intraday to $89.62 per barrel.

London copper prices are within $300 per ton of the record high set in January.

Yen Surges, Market on Alert for Intervention Risk

The yen strengthened for a second consecutive session, rising to 157.63 per dollar, a three-week high, keeping markets on high alert for Japanese authorities to re-enter the currency market. The Bank of Japan (BOJ) intervened in July.

According to Bloomberg, the yen's appreciation was partly triggered by algorithmic trading. Chris Weston, head of research at Pepperstone Group Ltd., wrote in a note: "Clearly, this was not a full-scale intervention, given the relatively limited volatility, but certain factors did activate algorithmic programs."

Behind the yen's move is rising market expectations that the BOJ will tighten monetary policy this month. A BOJ board member earlier this week raised the possibility of extraordinary or consecutive rate hikes, and overnight index swaps now fully price in a 25-basis-point hike at the September meeting, though the probability of a larger 50-basis-point hike is still seen as extremely low.

Meanwhile, Japan's 30-year JGB auction saw strong demand, with the 30-year yield earlier falling 10 basis points to 4.065%; the 10-year benchmark yield also retreated to around 2.97% from Wednesday's high of 3.015%, which was the highest since 1996.

Fed Rate Hike Expectations Rise, Jobs Data a Key Variable

Since September, global bond yields have surged as the U.S.-Iran conflict reignited, with inflation concerns and Fed rate hike bets rising in tandem, throwing markets into turmoil this week. According to CME Group's FedWatch tool, markets now price in about a 67% chance of a 25-basis-point rate hike by the Fed this month, up sharply from 37% a week ago.

New York Fed President John Williams on Wednesday tempered those expectations, saying the rise in long-term Treasury yields reflects solid economic fundamentals and stressing the need for more data before making rate decisions. Separately, according to Reuters, Fed Governor Christopher Waller is scheduled to speak at the Reuters NEXT event in Washington on Thursday; he said in July that further rate hikes may be needed in the near term.

ADP employment data released Wednesday came in below expectations, but markets are more focused on Friday's nonfarm payrolls report. The September 11 CPI data will be the next key data point.

Natalia Lojevsky, managing director at CIFC Asset Management, wrote in a note: "There are multiple unresolved issues and conflicts in the market, and none has a clear timeline for resolution. Investors need to be cautious when entering." She also warned, "At some point, persistently higher yields will cause real pain for equities."

Tech Stocks Lead Gains, Asia-Pacific Markets Diverge

Jason Lui, head of Asia-Pacific equity derivatives strategy at BNP Paribas, said: "Asian equities are recovering moderately from yesterday's sell-off, with semiconductor and AI-related stocks rebounding on the back of optimistic guidance from U.S. tech companies overnight."

Japan's Topix rose 1%, with Mitsubishi Corp. up nearly 5%, leading gains among trading houses. Earlier, Berkshire Hathaway CEO Greg Abel reaffirmed the group's long-term commitment to Japanese investments and hinted at possible further increases in stakes. South Korea's Kospi rose as much as 1.5% in early trading before paring gains to trade near flat. Singapore's Straits Times Index rose 0.7%, and Australia's S&P/ASX 200 rose 0.5%.

Oil Falls, Gold Rises, Mixed Signals in Commodities

Brent crude fell about 0.95% to around $95.40, after three consecutive days of gains. Trump's comments on the U.S.-Iran conflict were the direct trigger, and inflation and rate hike concerns stemming from high oil prices eased slightly.

Gold rose 1.2% to around $4,430 per ounce, reflecting continued safe-haven demand. European natural gas futures rose for a fourth straight day, approaching their highest closing level since early 2023. Base metals were broadly firmer, with London copper prices within $300 per ton of the record high set in January.

The Bloomberg Dollar Spot Index fell 0.2% for a second consecutive day.