The rise in stocks stalled and bond prices fell globally as oil prices surged due to increased attacks on crude oil tankers in the Middle East.
S&P 500 futures were little changed after the index hit a record high in the previous session, while Nasdaq 100 futures slipped 0.2%. The pan-European STOXX 600 index fell 0.6%, ending a three-day winning streak. SK Hynix shares dropped nearly 3% in South Korea ahead of the expiration of the lock-up period for its US depositary receipts, and the MSCI Asia Pacific index declined 0.9%.
Brent crude rose above $100 a barrel after Iran intensified attacks in the Strait of Hormuz dampened optimism that shipments passing through the waterway would return to pre-war levels.
The momentum for a recovery in bond prices faded on Tuesday, as the yield on 10-year US Treasury bonds rose above 5.30%, while French and Italian sovereign bonds led the decline in debt prices in Europe.
Meanwhile, the dollar continued its gains as bond yields rose and demand for safe-haven assets increased, while the euro hovered near its lowest level since May 2025. Bitcoin fell 1.6% to $84,240, its biggest drop in a week, and gold prices declined towards $4,130 an ounce.
Stay tuned for the start of the financial results season.
Market anxiety persists as bond yields remain near their highest levels in decades amid rising energy prices and inflation expectations. Traders are also awaiting the start of earnings season to determine whether profits can continue to support valuations in challenging conditions, and whether the artificial intelligence boom has sufficient momentum to sustain itself.
“The risk of inflation looms and, along with rising global bond yields, is putting pressure on some market sectors,” said Ipek Ozkardskaya of Swissquote, according to Bloomberg. “I’m referring to sectors that aren’t benefiting from the supportive environment created by artificial intelligence.”
With little economic data on investors' calendars, the upcoming US earnings season will test whether the hundreds of billions of dollars that tech giants are spending on artificial intelligence are translating into stronger profits.
Tim Waterer, senior market analyst at KCM Trade, told Bloomberg: “There’s a sense that Asian markets are starting to lose some of the relative momentum they had earlier. After a period of outperformance, the lack of new catalysts, coupled with continued high oil prices and bond yields, is making the region look a bit overextended.”
He continued: At the same time, the United States continues to rise, supported by optimism about earnings, so attention is naturally turning back towards Wall Street, while Asia is playing catch-up but in the opposite direction.
US corporate profits support Wall Street
Analysts expect S&P 500 companies to see their third-quarter earnings rise by about 25% compared to the previous year, according to data compiled by Bloomberg Intelligence.
Technology remained in the spotlight as Nvidia's market capitalization approached $6 trillion. Elon Musk's SpaceX was also in talks with banks and investors to raise $40 billion in debt to purchase chips from Nvidia, according to people familiar with the matter.
Hebei Chen, a market analyst at Vantage Global Prime, said that Wall Street and Asia are beginning to show very different levels of tolerance for higher yields.
According to Bloomberg, she added: In the United States, a narrow group of AI companies and cash-rich giants still have enough earnings power to overcome the rising cost of capital, while high yields in Asia are putting pressure from several directions at once, including valuations, currencies, foreign capital flows, and the space available for central banks to ease.
In Asia, attention is focused on the divergent performance of Taiwanese and South Korean stocks. The Taiex index outperformed the Kospi by about 23 percentage points last quarter, the widest gap since the beginning of the century.
“Korea’s more lukewarm response partly reflects growing caution about the funding behind the AI boom,” said Jong-In Yoon, CEO of Fibonacci Asset Management Global, according to Bloomberg.
He added: High long-term bond yields are putting pressure on technology company valuations, and increased corporate debt issuance to finance capital spending on artificial intelligence could add to those pressures.
Samsung Electronics, a leading chipmaker, is expected to announce its largest-ever quarterly profit on Thursday when it releases its preliminary results. However, even exceptionally strong figures may not be enough to reassure investors that demand for memory chips is sustainable and that high product prices can be sustained over the long term.
Asia is more sensitive to rising returns
While U.S. stocks jumped to record highs in the previous session, high oil prices and bond yields remain at multi-year highs, while currency market volatility is capturing the attention of macroeconomic traders.
Peter Dragicevic, Asia-Pacific currency strategist at Corpay, wrote in a note: “The underlying issues that were prominent remain unresolved,” according to Bloomberg.
He added: The background suggests further volatility in the coming period. Recent history shows that the more optimistic tone in the markets observed overnight may not last long.
