Asia stocks subdued as rising yields, oil weigh; RBA hikes rates as expected

Asian stocks traded in narrow ranges on Tuesday as surging bond yields and higher oil prices pressured risk appetite, while the Reserve Bank of Australia increased interest rates to 15-year highs in line with market expectations.

Regional stocks also took cues from their U.S. peers. Wall Street futures traded largely unchanged in Asian trading after all three major indices fell modestly overnight.

Asia stocks weighed down by surging yields, oil prices

Japan’s Nikkei 225 slipped 0.5% by 06:42 GMT, while the broader TOPIX index slid 1.8%.

South Korea’s KOSPI closed 0.3% lower, while Hong Kong’s Hang Seng index fell 0.5%.

Reversing earlier losses, China’s blue-chip CSI 300 and Shanghai Composite edged up 0.2% each.

Elsewhere in Asia, Singapore’s Straits Times Index dipped 0.3%, while India’s Nifty 50 ticked down 0.2%.

The benchmark 10-year U.S. Treasury yield climbed above 5.27% overnight, its highest level in 19 years. The two-year yield approached 5% as traders increased bets on further Federal Reserve rate increases through the middle of next year.

Higher yields raise the discount rate applied to equities and increase borrowing costs for governments and companies, putting pressure on high-growth technology stocks in particular.

Oil prices added to the inflation concerns. Brent crude rose to around $107 a barrel as there was no clear breakthrough in efforts to ease the conflict involving the United States and Iran and restore normal traffic through the Strait of Hormuz. 

RBA hikes rates to 15-yr high to tame inflation

In Australia, the S&P/ASX 200 ended 0.3% higher. The RBA raised its cash rate by 25 basis points to 4.60%, its fourth increase this year, as persistent inflation and rising energy costs kept price pressures elevated.

The unanimous decision lifted rates to their highest level since late 2011. The RBA said some upside inflation risks were materialising, citing high energy costs and weak productivity, while underlying inflation remained at 3.6%, above its 2%-3% target range.

The central bank said it remained prepared to raise rates further if needed, as it seeks to prevent high inflation from becoming entrenched.

Investors also looked ahead to a busy U.S. data calendar, including inflation, manufacturing and labour-market reports, for clues on the path of Federal Reserve policy.

Tech stocks under pressure amid AI risks

Technology shares remained under pressure as signs of a slower pace of artificial intelligence development added to concerns about the huge investment underpinning the sector.

Hong Kong’s Hang Seng TECH sub-index fell 1% on Tuesday, while Japan’s top tech investor SoftBank Group (TYO:9984) slid 3.5%.

OpenAI has scrapped the release of GPT-6.1 Astra, its next-generation artificial intelligence model, after it failed internal safety controls, the Wall Street Journal reported on Monday. 

The report followed news that OpenAI had paused training, evaluation and inference with tool use for some of its most capable models as it strengthens safety controls. 

Investors were also digesting Anthropic’s IPO prospectus, which offered a stark picture of both the scale and cost of the AI boom.

A Reuters report showed that the Claude maker’s revenue rose nearly 12-fold to about $4.6 billion in 2025, but reported a $42 billion net loss, including a $34 billion accounting charge, while planning another $518 billion in cloud and infrastructure spending.

The prospectus also warned that increasingly capable AI systems could pose catastrophic or existential risks.

Chinese technology stocks remained particularly fragile after shares were hit on Monday by reports of U.S. plans to restrict Chinese components used in data centres.