The Nikkei 225 Index jumped 1.6% to above 66,000 on Thursday as the market reopened following an extended holiday, with technology and artificial intelligence stocks leading gains as they caught up with global peers. Global tech and AI shares outperformed in recent sessions after Meta’s Muse personal AI agent rekindled investor interest in the sector and boosted demand for AI infrastructure stocks. Notable gainers in Japan included Kioxia Holdings (3.2%), Ibiden Co (5.9%), Advantest (1%), SoftBank Group (5.4%) and Tokyo Electron (0.8%). Meanwhile, investors remained cautious as Wall Street came under pressure on Wednesday after strong US economic data and a rebound in oil prices fueled inflation concerns and reinforced expectations for further Federal Reserve rate hikes, pushing the dollar and Treasury yields higher. Investors also continued to monitor developments in US-China talks that could lead to new trade agreements.

Gold held below $4,300 an ounce on Thursday after falling sharply in the previous session, pressured by a stronger dollar and surging Treasury yields. Those moves came as stronger-than-expected US private-sector data heightened inflation concerns and strengthened expectations for further Federal Reserve rate hikes. Several Fed officials have also reiterated support for last week’s rate increase while warning about persistent inflation risks. Markets are now pricing in around a 70% chance of another Fed rate hike in October, up from 55% a day earlier. At the same time, oil prices rebounded as Iranian President Masoud Pezeshkian maintained a firm stance, saying Tehran would not allow freedom of navigation through the Strait of Hormuz while sanctions and a US blockade remain in place. Higher oil prices add to inflationary pressures, reinforcing expectations for a more hawkish interest-rate outlook.

US stock futures steadied on Thursday after the major averages fell in the previous session, as strong economic data, a weak Treasury auction and renewed inflation concerns tied to energy prices pushed Treasury yields to multi-decade highs. In regular trading on Wednesday, the Dow fell 0.68%, the S&P 500 declined 0.75% and the Nasdaq Composite dropped 1.13%. Ten of the 11 S&P sectors ended lower, led by communication services, utilities and consumer discretionary. The benchmark 10-year US Treasury yield climbed to around 5.11%, its highest level since July 2007. The move followed S&P Global PMI data showing strong new orders and multi-year highs in input and output price inflation, fueling expectations of another Federal Reserve rate hike this year. Oil prices also rebounded as uncertainty persisted over progress in US-Iran talks. Investors now await the latest weekly jobless claims data, along with earnings reports from Costco and Darden Restaurants.

Crude oil slipped below $92 per barrel on Thursday, paring gains from the previous session amid heightened uncertainty surrounding US-Iran negotiations. Iranian President Masoud Pezeshkian told the UN General Assembly that Tehran would not bow to threats, adding that the Islamic Republic won’t give up the right to develop nuclear technology for economic development. Pezeshkian also said Iran would not allow freedom of navigation through the Strait of Hormuz as long as sanctions and a US blockade remain in effect. In the US, Energy Secretary Chris Wright said the Trump administration was working with refiners on a voluntary reduction in US diesel exports as an alternative to imposing a formal ban on overseas shipments. Meanwhile, Saudi Arabia is taking steps to resume oil exports through its key East-West pipeline. Ukrainian President Zelenskyy also said he and President Trump had discussed an energy ceasefire.

US heating oil futures sank below $4.80 per gallon after reports that the Trump administration could impose a 90-day ban on diesel exports. The proposal faces divisions within the administration and the oil industry as market fundamentals clash against high diesel prices ahead of mid-term elections. The US exports around 20% of global diesel, flooding the domestic market with fuel in the short term should the ban pass. Still, should stocks of distillate fuel be refilled, the ban would cut refining capacity at a time that crack spreads continue to extend record highs. Distillate fuel prices had surged to record highs this month as low crude oil supplies from the Middle East and strikes on Russian refineries dampened global availability of fuel. The potential for an export ban from the US were combined with President Trump attempting to orchestrate an energy infrastructure ceasefire between Russia and Ukraine.

The yield on the 10-year US Treasury note surged up to 16 bps to above 5.12% on Wednesday, the highest since 2007, as strong economic data and high energy prices consolidated expectations of more rate hikes by the Federal Reserve. S&P Global data showed private-sector activity expanding at its fastest pace in more than five years in September, with both services and manufacturing improving. The survey also showed accelerating inflationary pressures across both sides of the economy. The data were combined with hawkish remarks from Iranian leaders on their conflict with the US and GCC states, dimming hopes that imminent diplomatic improvements could restore energy supply from the Middle East. Treasuries have also been pressured by soaring corporate debt supply, with AI companies issuing over $1.5 trillion this year. Hence, primary dealers showed signs of uneasy demand at auctions, with the latest 5-year note auction tailing 3.1bps, well above recent averages.