Asian stock markets began the week on a positive footing, driven by easing oil prices, strong global demand for artificial intelligence technology, and encouraging signals from US-China trade talks. Oil prices extended their decline from Friday, following hopes that Saudi Arabia could restore about half of its crude shipments within days after a disruption to its East-West pipeline to the Red Sea. Despite this, both major crude contracts remained around $100 a barrel, significantly higher than pre-war levels.
The easing of oil prices has provided relief to central banks grappling with the inflationary impact of elevated energy costs. In South Africa, data suggests potential fuel price increases of up to R2.78 for petrol and R3.00 for diesel. However, the rand has been trading firmer across the board, with a value of R16.24 to the US dollar, R18.63 to the Euro, and R21.73 to the British pound on Monday morning. Citadel Global's managing director, Bianca Botes, attributes the local currency's strength to the retreat in oil prices and steadier global risk appetite.
Global demand for artificial intelligence technology and positive signals from US-China trade talks provided support for Asian equities on Monday morning. US and Chinese economic officials met on Sunday for closely watched talks on trade and AI, ahead of a summit on Thursday between US President Donald Trump and Chinese President Xi Jinping in Washington. The talks were described as "candid, in-depth and constructive" by Chinese state media.
The US-China talks included discussions on setting up a channel to communicate about AI issues, referred to as the "US-China AI dialogue". US Treasury Secretary Scott Bessent noted that the two countries had engaged in lengthy conversations. Asian markets responded positively, with Hong Kong's main index finishing Monday's trading 1.2% higher, while shares in Shanghai rose 1%. South Korea's tech-heavy benchmark gained 1.7%.
The oil market remains a key focus for investors, as the conflict between the United States and Iran shows little sign of ending soon. At the upcoming talks between Trump and Xi, a key area of interest is any potential Chinese cooperation on Iran, which could impact oil and bond market volatility. However, given China's reluctance to get involved so far, investors are cautioned against expecting significant developments.
Global stocks finished last week mixed, as central banks moved to curb inflation. The US Federal Reserve raised interest rates on Wednesday, while the Bank of Japan also increased interest rates to a three-decade high on Friday. The 25-basis-point increase to 1.25% was expected by markets, although the decision was not unanimous, passing by a 7-2 majority. Higher oil prices have increased pressure on monetary authorities worldwide.
At around 10am on Monday, key figures included West Texas Intermediate down 2.0% at $98.34 per barrel, and Brent North Sea Crude down 2.0% at $101.78 per barrel. Hong Kong's Hang Seng Index finished up 1.2% at 25,042.71, while Shanghai's Composite index rose 1.0% to 3,949.91. Tokyo's Nikkei 225 was closed for a public holiday.
Key points
- Asian stock markets rose on Monday, driven by easing oil prices and positive signals from US-China trade talks.
- The rand has been trading firmer across the board, supported by the retreat in oil prices and steadier global risk appetite.
- Global demand for artificial intelligence technology and US-China trade talks provided support for Asian equities on Monday morning.
