Asia report: Markets mixed as oil prices climb again

(Sharecast News) - Asia-Pacific markets were mixed on Monday as South Korea's Kospi hit a fresh record, while higher oil prices and renewed concerns over the Iran war kept broader sentiment under pressure.

"Risk appetite starts the week with a split personality," said Patrick Munnelly, market strategy partner at TickMill.

"Asian equities are still leaning into the AI trade, with the MSCI Asia Pacific index up 0.6% and tech doing the heavy lifting.

"South Korea surged 5% to a fresh record, reinforcing its position as one of the cleanest regional expressions of AI infrastructure demand, while the regional semiconductor index also hit new highs after Friday's record close in the Philadelphia Semiconductor Index."

Oil prices climbed after US president Donald Trump rejected Tehran's latest proposal to end the conflict, raising concerns that the war and disruption around the Strait of Hormuz could persist.

Iran's semi-official Tasnim news agency said the counteroffer called for an end to the war on all fronts and the lifting of sanctions on Tehran, citing an informed source.

Trump rejected the response in a Truth Social post, calling it "TOTALLY UNACCEPTABLE!"

Israeli prime minister Benjamin Netanyahu said on Sunday that the war with Iran was "not over," as the US and Israel continued efforts to curb Tehran's nuclear ambitions.

His comments came ahead of Trump's planned trip to China later this week, where he was expected to meet Chinese president Xi Jinping.

Brent crude futures were last up 2.18% on ICE at $103.50 per barrel, while the NYMEX quote for West Texas Intermediate gained 2.11% to $97.43.

"The macro problem is that the Middle East risk premium is back," Munnelly said.

"Trump's dismissal of Iran's latest nuclear proposal as 'totally unacceptable' has effectively reversed last week's peace deal optimism, sending Brent ... close to where it traded before last Wednesday's relief rally, after touching lows near $96 per barrel on Thursday."

Munnelly said that with the Strait of Hormuz still constrained, "the market is no longer pricing a clean de-escalation".

"Higher oil is feeding directly into bond markets, with the 10-year Treasury yield up four basis points to 4.39%, while the dollar is firmer across majors as geopolitical risk and higher-for-longer rate expectations combine," he added.

"Gold slipping toward $4,700 per ounce despite the risk backdrop speaks to that rates channel: safe-haven demand is being offset by rising real-yield pressure."

Seoul leads gains on mixed day for region

In equities, Japan's Nikkei 225 fell 0.47% to 62,417.88, although the broader Topix rose 0.3% to 3,840.93.

Nintendo dropped 8.44% as investors digested news that the games developer would raise Switch 2 prices while expecting a decline in console sales.

NH Foods fell 7.46%, while SoftBank Group lost 6.33%.

Munnelly said US equity futures were steady after another record finish on Wall Street and Europe looked set for a muted open, but added that "the breadth is telling: outside tech, price action is far less convincing.

"Nintendo's near-10% fall in Tokyo after warning on chip costs is a reminder that AI enthusiasm is not the same as margin immunity."

In China, the Shanghai Composite rose 1.08% to 4,225.02, while the Shenzhen Component gained 2.16% to 15,899.30.

Montage Technology surged 18.52%, Beijing Piesat Information Technology rose 14.14%, and Shanghai Industrial Development added 10.04%.

China's producer price index rose 2.8% year on year in April, the highest reading since July 2022 and well above Reuters poll forecasts for 1.6%, ending a 41-month deflationary streak, according to National Bureau of Statistics data.

Consumer prices rose 1.2% year on year, ahead of expectations for 0.9% and up from 1.0% in March, while CPI increased 0.3% month on month against expectations for a 0.1% fall.

Core CPI, excluding volatile food and fuel, rose to 1.2% from 1.1% in March, suggesting price pressures were broadening beyond energy.

The NBS attributed the factory-gate rise to higher prices for non-ferrous metals, oil and gas, and technology equipment, with the purchase price index rising 3.5%.

"China's inflation data add another complication, though not the one reflation bulls would want," Munnelly said.

He said the detail pointed "more to cost-push inflation from energy than a demand-led revival," adding that was less helpful for risk assets because "it squeezes margins and real incomes without necessarily improving volumes".

Hong Kong's Hang Seng Index edged up 0.05% to 26,406.84.

Longfor Properties rose 8.42%, Lenovo Group gained 6.94%, and Li Auto added 5.42%.

South Korea led regional gains, with the Kospi 100 jumping 5.54% to 9,395.53 and the broader Kospi reaching a fresh record.

SK Hynix rose 11.51%, LG Innotek gained 10.26%, and Hyundai Mobis advanced 8.64%.

Fortunes diverge for bourses down under

Turning down under, Australia's S&P/ASX 200 fell 0.49% to 8,701.80.

CSL tumbled 15.96%, Emerald Resources lost 5.25%, and Temple & Webster Group declined 4.55%.

Across the Tasman Sea, New Zealand's S&P/NZX 50 rose 0.27% to 13,210.48.

Infratil gained 4.59%, Synlait Milk added 4.44%, and Fletcher Building rose 3.19%.

Greenback gains on regional peers

In currencies, the dollar was last up 0.27% on the yen to trade at JPY 157.10, as it gained 0.06% against the Aussie to AUD 1.3808, and advanced 0.3% on the Kiwi to change hands at NZD 1.6809.

Reporting by Josh White for Sharecast.com.