Asian Shares Climb on Chip Rally, Oil Jumps As Gulf Hostilities Resume

Sydney: Asian shares climbed on Thursday as semiconductors got a respite from heavy selling, though ​gains were capped by a surge in oil prices as a resumption of hostilities in the Gulf reignited ‌inflation fears and hammered bonds.

Oil prices rose for a third straight session after President Donald Trump said the interim agreement with Iran to end the war was "over". U.S. military also launched fresh strikes on Iran for a second day to open the Strait of Hormuz, although Trump later said he did not ​expect a return to a full-fledged war, helping soothe concerns.

Brent crude futures rose 0.8% to $78.65 a barrel and were ​up 9% this week to cross above $80 a barrel for the first time since June 22. That knocked ⁠global bond markets and boosted bets that the Federal Reserve will have to raise interest rates this year to tame inflation, ​with Fed funds futures now implying 38 basis points of policy tightening this year, back to where they were a week ago.

Wall ​Street initially fell on Trump's comments but climbed off session lows, with the Nasdaq eking out a small gain of 0.2%. Chip giant Nvidia (NVDA.O), opens new tab rallied 3.6% after media reports that China plans to allow its top AI firms to buy a limited number of the company's H200 chips.

MSCI’s broadest index of ​Asia-Pacific shares outside Japan (.MISX00000PUS), opens new tab rose 0.8%, while Japan’s Nikkei (.N225), opens new tab climbed 2.3% to break a three-day losing streak.

South Korea’s KOSPI (.KS11), opens new tab jumped 3.8%, ​driven by a 3.6% rise in Samsung (005930.KS), opens new tab and a 7.5% surge in SK Hynix (000660.KS), opens new tab as investors bought into the recent sell-off in chipmakers.

Wall Street ‌futures were ⁠flat in Asia, while Europe's pan-region stock futures rallied 0.9%.

"At this stage, the market still appears skewed towards the view that the (Iran) conflict ultimately de-escalates, and negotiations resume around the Memorandum of Understanding," said Chris Weston, head of research at Pepperstone.

"Nevertheless, traders understand the need to remain open-minded. The situation remains highly fluid, and conviction around timing is exceptionally difficult."

Minutes released by the Fed showed concern ​about mounting inflation among policymakers as ​a few participants said ⁠there was already a case to raise borrowing costs, before ultimately agreeing with their colleagues to hold rates steady last month.

The global bond rout deepened in Asia. The yield on 10-year Japanese government ​bonds rose 1.5 basis points (bps) to 2.880%, the highest since September 1996, while Australia's 10-year government ​bond yields increased ⁠4 bps to 4.924%, the highest since early June.

The benchmark 10-year U.S. Treasury yields climbed another 2 basis points to 4.5852% on Thursday after rising 4 bps overnight. They were up 10 bps so far this week.

The reaction in the currency markets was rather muted, with ⁠the dollar ​failing to hold on to its yield support and last down 0.2% to ​162.38 yen . That was not far from 40-year peaks of 162.84 as speculators remain wary of Japanese intervention.

The euro edged up 0.1% to $1.1428, while sterling also rose ​0.1% to $1.3401, just below a three-week peak of $1.341. Gold was flat at $4,079 an ounce.

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