Asian stocks dip as high bond yields keep markets cautious

October 01, 2026 (MLN): Asian stocks were subdued on Thursday as investors weighed softer-than-expected US inflation data against elevated bond yields, higher oil prices and uncertainty over the outcome of US-Iran peace talks.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.2%, while South Korea’s KOSPI slipped 0.14%. Japan’s Nikkei rose more than 1%, supported by gains in chip-related stocks, while futures for the Nasdaq and S&P 500 were up around 0.3%.

According to Reuters, strong earnings from US chipmaker Micron failed to lift sentiment across Asian technology stocks, despite continued investor interest in artificial intelligence and semiconductor demand.

The market remained focused on rising borrowing costs after a sharp sell-off in global bonds during September. The benchmark US 10-year Treasury yield reached 5.306%, its highest level since June 2007, while the 30-year yield stood at 5.634%, after touching 5.6517% in the previous session, its highest level since June 2002.

The rise in long-term yields has kept investors cautious about the cost of capital, even as softer US inflation reduced expectations of another Federal Reserve rate hike this month.

US consumer prices rose less than economists expected in August, prompting traders to reduce bets on an October 28 rate increase. Markets were pricing a 38% probability of a hike, down from 50% a day earlier, according to CME’s FedWatch tool cited by Reuters.

New York Fed President John Williams also said there was “no urgency” for further action, adding to expectations that the Federal Reserve may wait before raising borrowing costs again.

“Micron’s numbers are another strong validation of AI and memory demand,” said Charu Chanana, chief investment strategist at Saxo, according to Reuters. However, she noted that investors may increasingly question whether the current memory shortage is approaching its peak.

The bond market remains a key concern as higher yields increase financing costs across economies. Darren Shames, global head of rates sales at Nomura, said the US fiscal position and the pace of the recent rate move were drawing investor attention.

The US dollar remained near a two-month high, supported by elevated Treasury yields. The euro stood at $1.1334 after falling 2.5% in September, while the Japanese yen weakened 0.3% to 157.95 per dollar.

In Tokyo, the Nikkei 225 was up more than 1% in Reuters trading, while AP reported the index had risen 2.4% to 68,355.81 in morning trading. Semiconductor-related stocks such as Advantest and Tokyo Electron gained on expectations of continued demand for chips and AI infrastructure.

Hong Kong’s Hang Seng index rose 0.4%, while the Shanghai Composite gained 0.3%. South Korea’s Kospi added around 0.5%, according to AP, while Australia’s S&P/ASX 200 fell 1.7%.

Oil prices remained elevated as markets assessed uncertainty surrounding US-Iran peace talks and the potential restoration of crude exports from the Middle East.

Brent crude futures stood at around $98.15 a barrel after rising more than 14% in September, marking a third consecutive monthly gain. US crude was around $89.91 a barrel.

Reuters reported that stalled negotiations between Washington and Tehran have continued to support oil prices, adding to concerns over inflation and keeping pressure on global markets.

US stocks also ended mixed on Wednesday. The S&P 500 fell 0.3% to 7,651.54, the Dow Jones Industrial Average declined 443.87 points, or 0.9%, to 50,906.05, while the Nasdaq Composite gained 0.2% to 26,861.06.

The latest inflation data provided some relief on the rate outlook, but investors remain focused on whether long-term Treasury yields can stay above the 5% level and how prolonged higher borrowing costs could affect economic growth and asset valuations.

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