By Ankur Banerjee
SINGAPORE, Oct 1 (Reuters) – Asian technology stocks rose on Thursday boosted by blockbuster earnings from AI chipmaker Micron, although US bonds struggled after their sharpest quarterly selloff in more than three decades as inflation risks from elevated energy prices linger.
Stalling peace talks between the US and Iran to end the seven-month-long war in the Middle East have kept crude prices aloft. Brent futures surged 42% in the July-September quarter.
The high-stakes earnings from Micron, a key supplier to AI bellwether Nvidia, signalled strong demand for AI memory chips, with financial commitments under long-term supply agreements at $32 billion, up from $22 billion in June.
That helped push tech-heavy stock markets in Asia higher. Japan’s Nikkei jumped over 3%, and South Korea’s KOSPI reversed earlier losses to gain 1.7%. Taiwan’s stock benchmark was 0.8% higher.
Futures for the US Nasdaq advanced 0.7%, while S&P 500 futures were up 0.4%. European stock futures though slid 0.75%, while Asian markets without a high concentration of AI shares were also lower.
“Micron’s numbers are another strong validation of AI and memory demand, but markets may increasingly be asking whether we are closer to peak memory shortage, even if demand continues to exceed supply,” said Charu Chanana, chief investment strategist at Saxo.
“The macro backdrop is also becoming more mixed. Softer US data has taken some pressure off Fed expectations and shorter-term yields, but long-term yields remain high, so the cost-of-capital concern has not really gone away,” Chanana said.
Investors were also contemplating softer-than-expected US inflation that lowered the odds of a rate hike from the Federal Reserve later this month.
ELEVATED BOND YIELDS BITE
Global yields surged in September as bond prices tumbled, with soaring energy costs sparking inflation fears and the AI boom boosting economic growth, leaving investors bracing for a period where interest rates stay higher for longer.
The yield on benchmark US 10-year Treasury notes hit 5.306%, the highest level since mid-June 2007. The 10-year yield gained 87 basis points in the July-September quarter, the biggest quarterly rise since 1994, LSEG data showed.
Market focus has been on how long US Treasury yields stay above the psychologically important 5% level while some investors even contemplate the possibility of yields breaching 6%.
“In the US, we have surpassed $40 trillion of debt and the fiscal situation shows no sign of improving. So 5% alone, in absolute terms, doesn’t really say much, especially when you think about it in a historical context,” said Darren Shames, global head of rates sales at Nomura.
“But I think it’s the trajectory of the rate move, the velocity that is really getting the attention of investors.”
Yields in Japan have climbed to multi-decade highs too, while those in Germany, France and Britain have all hit 17 to 19 year peaks.
On Thursday, the benchmark 10-year Japanese government bond yield was at 3.11%, not far from the 30-year high it hit last week.
SOFTER US INFLATION TEMPERS RATE HIKE BETS
Following Wednesday’s softer-than expected US inflation reading, traders are pricing in a 38% chance of a Fed hike this month, versus 50% a day earlier, CME’s FedWatch tool showed.
The Fed raised rates in September for the first time in three years, and flagged further increases in borrowing costs in the months ahead.
The odds of an October rate hike were also diminished by New York Fed President John Williams’ comments on Tuesday that he saw “no urgency” for further action.
The US dollar stood firm, supported by elevated Treasury yields. The euro was steady at $1.1321 after dropping 2.5% last month. The Japanese yen was 0.5% softer at 158.21 per dollar after rising 1.5% in September.
In commodities, Brent crude futures were 1.4% lower at $96.64 a barrel. [O/R]
(Reporting by Ankur Banerjee in Singapore; Editing by Kevin Buckland)
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