Oil surge above US$100 triggers Asian equity selloff
Asian markets declined Thursday as Brent crude breached US$100, prompting investors to reprice inflation risks and anticipate aggressive central bank rate hikes.
Equities across Asia fell on Thursday following a sharp rise in oil prices that reignited concerns over inflation. Brent crude reached a high of US$101.94, while West Texas Intermediate peaked at US$97.79, marking their highest levels since May. This spike followed a surge of more than 20 percent in less than a week, driven by renewed hostilities in the Middle East.
The price increase stems from escalating conflicts around the Strait of Hormuz and the Red Sea. Iran reported striking over a dozen vessels attempting to pass through the strait, while Saudi Arabia faces attacks from Houthi rebels on its oil facilities. With US diesel prices nearing a record US$6 per gallon, markets are pricing in higher probability that the Federal Reserve and the European Central Bank will raise interest rates to curb inflation.
Regional indices face broad-based decline
The macroeconomic pressure weighed heavily on regional stock exchanges. Seoul, Hong Kong, and Sydney all dropped by more than one percent. Tokyo, Shanghai, Singapore, Wellington, Taipei, and Manila also recorded significant losses. This decline mirrored a negative trend on Wall Street, where all three major indexes finished in the red, and across European markets.
Nintendo shares drop on weak pipeline
Among individual corporate results, Nintendo shares fell 5.5 percent after an online showcase of upcoming titles failed to impress investors. The Japanese gaming company presented its full calendar-year software lineup, which lacked major original releases. Market observers noted that the absence of high-profile new games contributed to the sell-off, distinguishing it from the broader macro-driven decline.
Inflation data drives rate hike bets
Investor sentiment remains cautious ahead of upcoming US consumer price data releases. This data is expected to influence the Federal Reserve's decision on raising rates next week. Government bond yields have also risen, partly due to a US Treasury buyback program that disappointed markets. According to GN stocks, the combination of high energy costs and sticky inflation signals a challenging environment for equity valuations in the near term.
