Asian markets exhibited mixed results on Friday, following recent fluctuations in oil prices and rising US and Japanese bond yields, which have reached multi-year highs amid ongoing geopolitical tensions in the Middle East. According to Gulf Times, the Nikkei 225 in Tokyo rose by 1.2% to close at 66,318.14 points, while the Hang Seng Index in Hong Kong fell nearly 2%.
Oil prices saw a slight decline, with Brent Crude dropping 0.7% after a significant spike of over 3% on Thursday. This volatility in oil prices comes as analysts express concerns over unresolved issues stemming from a two-month extension of a trade truce between the United States and China, which has left several critical matters unaddressed.
Global stock markets experienced a downturn on Thursday, primarily influenced by the US 10-year Treasury yield reaching its highest level since 2007, while the 30-year yield hit its peak since 2004. In Japan, the 10-year yield also reached a new 30-year high during Friday’s morning trading.
Kathleen Brooks, research director at XTB, noted that bond yields are fluctuating significantly, creating uncertainty in the markets. She highlighted various unresolved questions, including the potential for a bond crisis and the evolving situation in the Middle East, which could lead to continued volatility, particularly in commodity and bond markets.
While Tokyo’s market showed resilience, other regions faced declines. Sydney and Jakarta also reported losses, and markets in Shanghai, Taipei, and Seoul were closed for holidays. Despite the mixed performance, Brooks observed that stock declines this week have been relatively mild, with foreign exchange markets showing moderate movements, although there remains a clear preference for the US dollar.
In a related development, Japanese Finance Minister Satsuki Katayama revealed that US President Donald Trump expressed concerns regarding the weak yen during a recent bilateral meeting in Washington. This meeting coincided with a state dinner hosted by Trump for Chinese leader Xi Jinping, which, despite its ceremonial nature, highlighted the underlying tensions between the two superpowers.
While the extension of the trade truce until January 10 was seen as a minor success, it fell short of the two-year extension that China had hoped for. Lloyd Chan from MUFG pointed out that renewed geopolitical risks in the Middle East are emerging against a backdrop of tight oil markets, raising concerns over supply and inflation, while US-China trade risks continue to loom in the background.
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