South Korea's Kospi fell 1.08% on Monday, October 12 as investors in the country weighed a bearish outlook for the country's bond market. Strategists expected yields to resume rising as the impact of government measures to curb volatility fades and expectations of further interest rate hikes build.
Japanese markets stayed closed for Sports Day, as fresh Houthi attacks on Saudi Arabia rattled investors across the region. Sports Day is a national festival first held in 1966 to mark the opening of the 1964 Tokyo Olympics. Markets were pricing in about a 70% chance of the Bank of Korea raising rates by a cumulative 50 basis points over the next six months.
Traders weighed the Houthi strikes on Saudi Arabia, which unsettled sentiment across Asia. The group struck the kingdom's main airport again on Sunday, a day after a strike there killed 12 people. Analysts quoted by Bloomberg said that the escalation raised the risk of a wider conflict that could draw in the US and disrupt energy supplies and global trade.
Saudi Arabia was also backing a counteroffensive near Bab el-Mandeb, a vital shipping chokepoint between Asia and Europe. In India, the GIFT Nifty, which indicates how the stock market could open, pointed to a muted start with a positive bias. Nifty bulls entered an all-important week on cautious optimism after Friday's recovery, which produced the first green weekly candle after eight straight weeks of losses.
US stock index futures edged higher after Wall Street's choppy week. The S&P 500 hit a record on Tuesday, then fell over the next two sessions on worries about demand for artificial intelligence. It rebounded on Friday as investors turned to another strong earnings season and remained within striking distance of its peak.
US and European inflation figures are due this week, and several central bank officials are scheduled to speak. Traders will closely watch the latest US consumer price data and an appearance by US Federal Reserve Chair Kevin Warsh for hints on the pace of further rate rises.
A stronger-than-expected September reading could revive the recent bond selloff by pushing the Fed to tighten more aggressively. The 10-year US yield neared 5.4% last week, its highest since 2002, with investors saying high yields were now doing some of the central banks' work by lifting borrowing costs themselves.
The US dollar held a narrow range against its major peers after a fourth straight weekly gain, its longest winning streak since early 2025. Oil prices and the war with Iran supported the currency as investors sought safety. Speculative traders remained bullish, betting the US economy could handle more rate rises better than its rivals.
Oil rose on supply fears. Brent crude initially gained 0.7% to $105.45 a barrel after the airport strikes and a fresh tanker attack near the Strait of Hormuz. The benchmark then turned volatile and slid below $104, to around $103.51, in early Asian trade.
West Texas Intermediate rose 0.5% to $92.27 a barrel.