Asian stock markets climbed on Monday, buoyed by technology gains in Japan and China while investors weighed softer U.S. economic data against ongoing disruptions in the Strait of Hormuz. Markets continue to monitor Federal Reserve interest rate expectations amid stubbornly high inflation pressures.
Asian equities mostly posted advances as investors extended a recent risk-on trend, despite persistent tensions surrounding vital Middle Eastern shipping lanes. The broader market reaction reflects a delicate balance between robust technology sector momentum and caution over energy supplies.
Tokyo and Regional Markets React to Tech Demand and Economic Data
In Tokyo, the benchmark Nikkei 225 jumped 2.1% to 66,970.22, driven higher by strong performances across technology and chip-related equities. Computer chip equipment maker Tokyo Electron climbed 4.1%, while chip testing device maker Advantest rose 6.4%, reflecting global demand tied to artificial intelligence expansion.
The advances came even as official data showed Japan’s economy grew at an annualized 1.1% in the second quarter, missing consensus forecasts for 2% growth. Private consumption dropped for the first time in eight quarters, and business investment contracted. However, exports provided a cushion, supported by demand for Japanese hybrid vehicles and semiconductor shipments.
Across other regional exchanges, Hong Kong’s Hang Seng gained 1.1% to 25,937.49, and the Shanghai Composite index picked up 0.7% to 3,966.59. South Korea’s Kospi added 0.7% to 6,299.66 as some major chipmakers experienced modest pullbacks, including a 0.4% decline for Samsung Electronics and a 0.1% dip for SK Hynix.
Federal Reserve Rate Expectations and U.S. Economic Indicators
Market participants are reassessing the trajectory of U.S. monetary policy following softer economic reports. Government figures showed that U.S. employers unexpectedly cut 23,000 jobs, alongside downward revisions to payroll figures for the preceding two months, which dimmed a key area of the economy and complicated the central bank’s inflation fight.
The softening labor market reduced expectations for an immediate interest rate increase from the Federal Reserve. Money markets priced in roughly a one-in-four chance of a rate hike in September, down significantly from approximately 50% the prior week, according to CME Group’s FedWatch tool.
Strait of Hormuz Disruptions Keep Energy Markets on Edge
Energy markets remained a primary source of caution as tanker traffic through the strategic Strait of Hormuz faced severe disruptions. International standard Brent crude gained 0.8% to $84.23 per barrel, while U.S. benchmark crude advanced 0.7% to $78.72 per barrel.
Geopolitical friction intensified after Israel rejected a proposed deal announced by U.S. President Donald Trump for Gaza, while separate talks involving Iran and Oman addressed management of the Strait of Hormuz amid Iranian suggestions that vessels linked to hostile countries
would be restricted.
“Negotiators said that a deal to establish a safe shipping route was close, but Iran may now be exploring just how much it can extract from the U.S. in return,”
Bas van Geffen, senior macro strategist for Rabobank
Foreign Exchange Movements and the Japanese Yen
Traders continue to watch Tokyo closely for potential intervention measures as the currency hovers near historical intervention thresholds, driven by expectations surrounding the Bank of Japan’s policy path.
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