Global bond yields fell, South Korean stocks closed up 0.26%, the yen surged, and Brent crude oil fell more than 1% intraday.

Global bond yields fell, South Korean stocks closed up 0.26%, the yen surged, and Brent crude oil fell more than 1% intraday.

Asian stocks generally rose on Thursday, global bond yields fell, and oil prices stabilized after a three-day winning streak. This followed US President Trump downplaying the possibility of a protracted US-Iran conflict, easing market tensions. Meanwhile, the yen strengthened significantly, triggering speculation about possible intervention in the foreign exchange market by Japanese authorities.

The MSCI Asia Pacific equity index rose 1.1%, rebounding from Wednesday's sell-off. Chip-related stocks, including SK Hynix, led the gains, benefiting from Broadcom's optimistic outlook for AI chip sales over the next two years. European stocks opened mixed, with the German DAX index up 0.04% and Nasdaq 100 futures up slightly by 0.2%.

Brent crude oil prices retreated slightly from around $95.40 a barrel. Trump indicated that US military action against Iran might be short-lived and reiterated US control of the Strait of Hormuz. The decline in oil prices eased selling pressure in the US Treasury market, with Treasuries extending gains from the previous trading day, and the 10-year yield remaining largely stable around 4.77%. Market focus has now shifted to Friday's US non-farm payrolls report to gauge the direction of the Federal Reserve's monetary policy.

"The market faces numerous unresolved issues and conflicts, none of which have a clear timeline for resolution," wrote Natalia Lojevsky, Managing Director of CIFC Asset Management, in a report. "Investors should exercise caution when entering the market." She also warned, "At some point, persistently high yields will inflict real pain on the stock market."

European stocks opened mixed, with the German DAX index up 0.04%, the UK FTSE 100 index up 0.12%, the French CAC40 index down 0.01%, and the Euro Stoxx 50 index up 0.05%.The Nikkei 225 index closed down 0.2% at 64,214.48 points. The Topix index closed up 0.5% at 4,102.04 points. The Seoul Composite Index closed up 0.26% at 6,579.48 points.The yen strengthened for the second consecutive trading day, rising to 157.63 per dollar, a three-week high.The US dollar index fell slightly by 0.2% for the second consecutive day.The yield on the 10-year U.S. Treasury note remained largely unchanged at 4.77%.Demand was strong at the auction of Japanese 30-year government bonds, after the yield on the 30-year bond had previously fallen 10 basis points to 4.065%, while the yield on the 10-year government bond fell 4 basis points to 2.970%.Gold prices rose 1.2% to around $4,430 per ounce.Brent crude oil fell 1.0% to $94.67 a barrel. WTI crude oil fell 1.5% to $89.62 a barrel.London copper prices are now less than $300 per tonne away from the record high reached in January.

The yen has surged, raising concerns about potential intervention in the market.

The yen strengthened for the second consecutive trading day, rising as high as 157.63 against the dollar, a three-week high, keeping markets on high alert for a potential return to the foreign exchange market by Japanese authorities. This followed the Bank of Japan's (BOJ) intervention in the foreign exchange market in July.

According to Bloomberg, the yen's appreciation was partly triggered by algorithmic trading. Chris Weston, head of research at Pepperstone Group Ltd., wrote in a report: "Clearly, this wasn't a full-blown intervention, given the relatively limited volatility, but certain factors did activate the algorithmic program."

The yen's movement reflects rising market expectations that the Bank of Japan will tighten monetary policy this month. Earlier this week, a Bank of Japan board member raised the possibility of unconventional or consecutive rate hikes. Overnight index swap pricing has already fully priced in a 25 basis point rate hike at the September meeting, but the probability of a significant 50 basis point hike remains extremely low.

Meanwhile, strong demand at the auction of Japanese 30-year government bonds pushed the 30-year yield down 10 basis points to 4.065%; the yield on the benchmark 10-year government bond also fell back to around 2.97% from a high of 3.015% reached on Wednesday, the highest level since 1996.

With expectations of a Fed rate hike rising, employment data becomes a key variable.

Since September, global bond yields have surged following the renewed conflict between the US and Iran, with inflation concerns and bets on a Federal Reserve rate hike rising in tandem, leading to market volatility this week. According to CME Group's FedWatch tool, the market is currently pricing in a 67% probability of a 25 basis point rate hike by the Fed this month, significantly higher than the 37% a week ago.

New York Fed President John Williams tempered these expectations on Wednesday, saying the rise in long-term Treasury yields reflects solid economic fundamentals and emphasizing the need for more data before making a rate decision. Furthermore, according to Reuters, Fed Governor Christopher Waller is scheduled to speak at the Reuters NEXT event in Washington on Thursday; he stated in July that further rate hikes might be necessary in the near term.

Wednesday's ADP employment data came in below expectations, but the market is more focused on Friday's non-farm payroll report. Following that, the Consumer Price Index (CPI) data on September 11 will be the next important data point.

"The market faces numerous unresolved issues and conflicts, none of which have a clear timeline for resolution," wrote Natalia Lojevsky, Managing Director of CIFC Asset Management, in a report. "Investors should exercise caution when entering the market." She also warned, "At some point, persistently high yields will inflict real pain on the stock market."

Technology stocks led the gains, while performance varied across Asia-Pacific markets.

Jason Lui, Head of Asia Pacific Equity Derivatives Strategy at BNP Paribas, said, "Asian stocks are recovering modestly from yesterday's sell-off, with semiconductor and AI-related stocks rebounding, benefiting from optimistic guidance released overnight by US technology companies."

Japan's Topix index rose 1%, with Mitsubishi Corporation leading the gains in the trading company sector, rising nearly 5%. This followed Berkshire Hathaway B CEO Greg Abel reiterated the group's long-term commitment to investing in Japan and hinted at possible further increases in holdings. South Korea's KOSPI index rose as much as 1.5% in early trading but has since retreated to flat. Singapore's Straits Times Index rose 0.7%, and Australia's S&P/ASX 200 index rose 0.5%.

Oil prices fell, gold rose, and commodity signals were mixed.

Brent crude oil fell about 0.95% to around $95.40, after rising for three consecutive days. Trump's comments on the US-Iran conflict were the direct trigger, and concerns about inflation and interest rate hikes caused by high oil prices also eased somewhat.

Gold prices rose 1.2% to around $4,430 an ounce, reflecting continued safe-haven demand. European natural gas futures rose for the fourth consecutive day, nearing their highest closing level since early 2023. Base metal prices generally strengthened, with London copper prices less than $300 per tonne away from their record high reached in January.

The Bloomberg Dollar Index fell slightly by 0.2% for the second consecutive day.

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