Most Asian stock markets advanced on Monday, led by strong gains in Japan and South Korea.
Investors welcomed signs of progress in the latest US-Iran peace talks. However, a stronger US dollar and expectations of higher interest rates limited broader market optimism.
Technology stocks provided the main support across the region. Chipmakers and companies linked to artificial intelligence demand recorded some of the strongest gains.
US-Iran Talks Improve Risk Sentiment
Investor confidence improved after Iranian officials reported progress in talks with the United States.
The negotiations took place in Switzerland on Sunday and involved mediators from Pakistan and Qatar. Iran’s comments helped ease concerns about another escalation in tensions between Washington and Tehran.
Those concerns had increased after US President Donald Trump threatened to resume military action against Iran.
Following Tehran’s positive statements, S&P 500 futures recovered part of their earlier losses during Asian trading.
Hawkish Federal Reserve Limits Optimism
Asian markets also received support from Wall Street’s gains during the previous week.
Nevertheless, investors remained cautious after the Federal Reserve delivered a more hawkish message than markets had expected.
US policymakers indicated that interest rates could remain elevated for longer. The central bank also left open the possibility of maintaining restrictive monetary conditions as inflation risks persist.
Markets are now awaiting comments from several Federal Reserve officials. Investors will also closely monitor the upcoming US core Personal Consumption Expenditures inflation report.
The core PCE index is the Federal Reserve’s preferred measure of inflation and could influence expectations for future interest rate decisions.
Japan Stocks Rally on AI Investment Report
Japan’s Nikkei 225 surged 2.3% to 72,900 points, while the TOPIX gained 1.3%. Both indexes remained close to record highs.
Japanese technology and semiconductor stocks led the advance.
The rally followed a Nikkei report suggesting that the Japanese government plans to mobilize approximately 10 trillion yen, or $65 billion, for physical artificial intelligence technologies by 2040.
The proposed investment could support demand for advanced chips, robotics and AI-related manufacturing equipment.
Weak Yen Supports Japanese Equities
Japanese stocks also benefited from continued weakness in the yen.
The currency remained near multi-decade lows against the US dollar despite the Bank of Japan’s 25-basis-point interest rate increase during the previous week.
A weaker yen can benefit major Japanese exporters by increasing the value of their overseas earnings when converted back into the local currency.
South Korean Chip Stocks Extend Gains
South Korea’s KOSPI climbed 1.4%, extending its recent advance and remaining close to record levels.
Strong investor demand for technology stocks continued to support the market. Optimism surrounding AI-related semiconductor demand remained one of the main drivers.
Investors are also awaiting South Korea’s trade data later this week. The figures could provide further evidence about the strength of the country’s export-focused economy.
SK Hynix Overtakes Samsung
SK Hynix was one of the session’s best performers, with its shares surging nearly 6%.
The advance allowed the memory chipmaker to overtake Samsung Electronics and become South Korea’s most valuable listed company.
SK Hynix has benefited from strong demand for high-bandwidth memory chips used in advanced artificial intelligence processors.
Japanese semiconductor companies also moved higher as investors continued to view chipmakers as major beneficiaries of the global AI investment boom.
Chinese Stocks Advance on Policy Hopes
Mainland Chinese markets traded higher as investors looked for additional signs of economic support from Beijing.
The Shanghai Shenzhen CSI 300 rose 0.7%, while the Shanghai Composite gained 0.2%.
Traders also prepared for several important Chinese economic reports that could provide fresh information about the country’s recovery.
Hong Kong Falls as BYD Shares Decline
Hong Kong’s Hang Seng Index underperformed other Asian markets, falling 0.8%.
BYD led losses among Chinese electric vehicle stocks after reports suggested that the European Union was considering additional restrictions on Chinese vehicle imports.
Fresh tariffs or trade measures could increase costs for Chinese automakers and weaken their competitiveness in the European market.
Australian Market Awaits Key Data
Australia’s ASX 200 slipped 0.1%, falling behind the broader regional advance.
Investors are awaiting Australian inflation and employment figures later this week. The data could influence expectations for the Reserve Bank of Australia’s monetary policy outlook.
Australian policymakers have remained cautious about inflation. Therefore, stronger-than-expected data could reinforce expectations that interest rates will stay elevated for longer.
Markets are also preparing for industrial production data from Taiwan, inflation figures from Singapore and the US core PCE report later this week.
