Asian markets retreated on Friday as the recent tech-driven rally lost momentum, with investors shifting focus to rising inflation and the growing likelihood of another U.S. interest rate hike.
The pullback came despite strong gains on S&P 500 and Nasdaq Composite, which hit record highs after a surge in tech shares led by Nvidia. The company jumped after Washington cleared sales of its advanced H200 chips to Chinese firms, a move that buoyed sentiment on Wall Street but failed to carry through into Asian trading.
Investor attention remains fixed on Donald Trump’s visit to Beijing, where he met Xi Jinping amid fragile geopolitical conditions shaped by the Iran conflict and ongoing trade tensions.
Markets across the region struggled. Japan’s Nikkei 225 fell as fresh data showed wholesale inflation hitting a three-year high, reinforcing expectations that the Bank of Japan could tighten policy. Stocks in China and Hong Kong also declined, while South Korea’s benchmark index gave up early gains after briefly hitting a record high.
At the centre of the unease is inflation, now being amplified by surging energy prices. Brent crude climbed sharply this week, hovering around $107 a barrel as disruptions in the Strait of Hormuz and attacks on shipping routes raised concerns about global supply.
That pressure is feeding directly into bond markets. Yields on U.S. Treasuries have surged, with the 30-year yield climbing above 5% for the first time in years, reflecting weakening demand and rising expectations of tighter monetary policy. Shorter-term yields are also rising, signalling that borrowing costs could increase across the board.
The combination of elevated oil prices and persistent inflation is creating a difficult environment for investors. While tech optimism continues to drive pockets of growth, broader market sentiment is being shaped by macroeconomic risks that show little sign of easing.
