Hong kong: Global markets are trading mixed amid overvaluation concerns in the semiconductor sector and economic data in Asia, despite the optimism that a new deal could be reached in the Middle East. The geopolitical tensions between the US and Iran that flared last week somewhat eased at the start of the new week.
According to Anadolu Agency, US President Donald Trump announced that negotiations with Tehran would resume on Monday, expressing optimism about reaching an agreement on reopening the Strait of Hormuz and Iran's nuclear disarmament. This development has somewhat alleviated geopolitical risk perception, leading to a decline in oil prices. However, global bond yields and the lack of positive signals from Asian economic data continue to dampen risk appetite.
China's recent advancements in advanced chipmaking and artificial intelligence (AI) sectors have heightened concerns over profitability and growth in the semiconductor business. Meanwhile, the US' Personal Consumption Expenditures price index showed a decline from 4.1% to 3.7% in June, reducing the likelihood of multiple Federal Reserve rate hikes.
Markets are anticipating at least one rate hike by the end of the year, with probabilities priced in at 67% for September and 96% for October. Signals from US nonfarm payrolls, expected to be released this week, could further influence Fed expectations.
In the foreign exchange market, US Treasury Secretary Scott Bessent confirmed intervention in the Japanese yen, stating that interventions carried out on July 31 curtailed irregular currency movements. Additional joint market interventions might be employed if necessary. Analysts warn that the sharp depreciation of the Japanese yen poses a threat to the global financial system, potentially disrupting capital flows and fueling financial market volatility.
Bond yields experienced a limited pushback as the US 30-Year Treasury yield started the week at 5.24%, a decrease of about four basis points on Monday after reaching its highest in 19 years last week. The US 10-Year Treasury yield began at 4.7%, down five basis points, on Monday.
The US Dollar Index reached 99 last week for the first time since June 17, as expectations that the Fed would not take anticipated hawkish steps became prominent. The US dollar started Monday at 99.7. Gold prices climbed 0.6% to $4,070 per ounce due to easing geopolitical tensions and diminishing likelihood of rate hikes, while the price of October-delivery Brent crude fell 5.1% to $83.4 a barrel.
Attention is focused on corporate financial results, particularly SpaceX's, as it recently went public and its shares suffered sharp losses after reaching a record market cap. American indexes started the new week positively, influenced by the partial easing of Middle East geopolitical tensions and hopes for a new deal, which also shaped European markets. European indexes began the week positively, with attention on the producer inflation and sector-specific Purchasing Managers' Index (PMI) data to be released this week.
The decline in oil prices is crucial for European economies that depend on imported energy. Analysts suggest that the drop in energy costs could alter inflation and growth expectations. The European Central Bank's likelihood of hiking its policy rates in September reached 87%, according to money market estimates.
Meanwhile, the number of undocumented migrants passing away attempting to cross into Ceuta, a North African Spanish city bordering Morocco, rose to 88. Approximately 73,500 undocumented migrants have been estimated to have returned from Ceuta to Morocco since July 30.
Overvaluation concerns in the global semiconductor sector continued, overshadowing optimism in Asian stock markets. Japan's final manufacturing PMI reached 54.5 in June, slightly declining from the previous month, but still maintaining strong momentum, indicating persistent economic activity and potential price pressures. This development fueled concerns that the Bank of Japan might further tighten its monetary policy.
China's manufacturing PMI fell short of expectations at 50.9, raising concerns over the country's economic growth. The selloff in AI-related tech stocks continued into the new week, with a sharp decline in the South Korean stock market. AI memory chipmaker SK Hynix's shares fell 8%, while tech giant Samsung Electronics' shares dropped 8.4%. Near Monday's close, Japan's Nikkei 225 declined 1.2%, South Korea's Kospi fell 5.4%, and China's Shanghai Composite dropped 0.7%, while Hong Kong's Hang Seng traded flat.