GLOBAL MARKETS: Asia stocks rebound on dip buying, bonds lag

SYDNEY — Asian stock markets rallied on Tuesday and oil prices retreated after Israel and Iran said they would temporarily halt attacks, easing geopolitical tensions and prompting investors to buy recent dips in semiconductor stocks.

However, analysts warned that the rebound was narrow. About 60% of the S&P 500 finished in negative territory overnight even as the broader index posted a modest gain. U.S. stock futures edged higher in early Asian trade, while European futures were slightly lower.

Bond yields remained elevated, continuing to pressure stretched equity valuations. Shipping activity through the Strait of Hormuz also remained heavily restricted, keeping energy market risks in focus.

“Inflation remains sticky enough that 46 of 68 global central banks are overshooting targets, which helps explain why bond markets are repricing for tighter policy, and why long-duration assets, private credit, and several emerging market currencies are struggling,” analysts at Bank of America said in a note.

They added that “our Global Breadth Rule shows nearly half of equity markets already overbought, led by Korea, Taiwan, and Finland.”

South Korea’s benchmark index rebounded sharply, rising about 7% after Monday’s more than 8% drop, which had followed a strong rally that left valuations stretched and retail investors heavily leveraged.

Japan’s Nikkei gained 2.1% after falling 3.9% in the previous session. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 3.0%.

Chinese blue-chip stocks added 0.9% after data showed exports rose 19% in May and imports climbed 27%, both exceeding expectations. The figures suggest China is successfully finding new export markets amid ongoing U.S. trade barriers, even as domestic demand remains weak.

In Europe, futures for the EUROSTOXX 50 and Germany’s DAX both slipped 0.2%, while FTSE futures in the United Kingdom edged down 0.1%.

In the United States, S&P 500 futures rose 0.2% and Nasdaq futures gained 0.5%. Investors are now looking ahead to Oracle’s earnings report on Wednesday as a key test for the technology sector.

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Apple shares were little changed after unveiling a long-anticipated artificial intelligence upgrade to Siri during its Worldwide Developers Conference.

Meanwhile, OpenAI has confidentially filed for a U.S. initial public offering, joining Anthropic in a growing wave of artificial intelligence firms seeking major equity financing.

Bond markets remained under pressure following a strong U.S. jobs report, which reinforced expectations that the Federal Reserve may keep interest rates higher for longer. Upcoming U.S. consumer price data is expected to show that rising energy costs continued to push headline inflation higher in May.

Futures markets are now pricing in about a 60% chance of a Federal Reserve rate increase by October, with a quarter-point move nearly fully priced for December.

The yield on the two-year U.S. Treasury note held at 4.170%, after briefly touching its highest level since early 2025.

In Europe, markets are fully pricing in a quarter-point rate cut by the European Central Bank at its upcoming meeting, with expectations for further easing by year-end.

The U.S. dollar remained strong against the Japanese yen at around 160.20, near its recent peak. Traders are watching closely for potential intervention by Japanese authorities if the currency weakens further.

The euro traded near $1.1538 after hitting a nine-week low, while the British pound edged higher to $1.3347 after earlier losses.

In commodities, Brent crude oil fell 0.9% to $93.40 per barrel after briefly surging overnight, while U.S. West Texas Intermediate dropped 1.2% to $90.14 per barrel.

Gold was steady at $4,331 an ounce after touching a two-month low earlier in the week. -Reporting by Wayne Cole; Editing by Kevin Buckland and Himani Sarkar/Reuters