Technology stocks performed strongly across Asian markets Thursday following a wave of encouraging corporate earnings, though climbing oil costs and increasingly aggressive central bank stances on inflation sent bond values plummeting.
Market participants expressed concern that both the European Central Bank and Bank of England would signal higher interest rates later Thursday, following a Federal Reserve decision where three members voted to abandon the central bank’s accommodative stance in what marked the most split vote since 1992.
Departing Fed Chair Jerome Powell announced his intention to remain as a board governor temporarily to protect the institution’s autonomy while his replacement Kevin Warsh, selected by President Donald Trump who favors reduced rates, advances through the confirmation process.
Financial markets quickly eliminated expectations for Fed rate reductions this year, with approximately equal odds now placed on a rate increase by next spring. Treasury yields climbed to their highest point in a month while the dollar strengthened across the board, surpassing 160 yen.
The recent oil price surge raised additional alarm, with Brent crude futures soaring 6% overnight to reach a four-year peak of $122.53 per barrel amid concerns over potential prolonged closure of the Strait of Hormuz.
“Macroeconomic risks are significant at this juncture, but stock market bulls hope a rosy path for artificial intelligence can continue to offset cyclical weakness,” said Jose Torres, senior economist at Interactive Brokers.
“If earnings, capital expenditures and outlooks are buoyant, investors could remain sanguine even as the threat of a slowdown in overall activity, loftier borrowing costs and widening credit spreads raise eyebrows,” Torres added.
Nasdaq futures advanced 1% in Asian trading after Google’s parent company Alphabet exceeded earnings expectations, driving its stock price up 7% in after-hours trading. Strong performance from Microsoft and Amazon also boosted optimism ahead of Apple’s upcoming results.
Meta Platforms faced disappointment as the company increased its annual capital spending projections to invest additional billions in artificial intelligence infrastructure, causing its stock to decline 7%.
The MSCI Asia-Pacific index excluding Japan remained unchanged Thursday but maintained course for an impressive 16% monthly gain. Japan’s Nikkei dropped 1% while still posting a comparable 16% April increase.
South Korea’s KOSPI reached a new record high after Samsung Electronics reported an eight-fold jump in operating profit driven by strong AI demand, before encountering profit-taking activity.
Chinese blue-chip stocks edged higher by 0.2% while Hong Kong’s Hang Seng index declined 0.3%.
Global bond markets suffered significant losses Thursday as oil price increases and Fed hawkishness triggered a Treasury selloff. Benchmark U.S. Treasury yields rose 1 basis point to 4.4237%, after jumping 6 basis points overnight to 4.434%, marking the highest level since late March.
Japanese 10-year government bond yields increased 4 basis points to 2.500%, reaching their highest point since June 1997. Australian 10-year government bond yields surged 6 basis points to 5.066%.
The dollar strengthened alongside rising yields, hovering near its highest level in over two weeks. It remained at 160.26 yen after climbing 0.4% overnight to 160.48 yen, approaching levels that have historically prompted intervention.
The Japanese currency has declined more than 2% since conflict began February 28, with investors establishing their largest short yen position in nearly two years, betting that neither rate increases nor intervention threats will support the currency.
