Asian shares struggled on Tuesday as investors weighed Middle East tensions and calls by industry figures for a slowdown in AI development, while elevated oil prices and higher bond yields added to caution before ⁠key central bank meetings in the United States and Japan.

In Hong Kong, the benchmark Hang Seng Index opened up 16 points, or 0.07 percent, at 24,934.

The tech index rose 20 points, or 0.47 percent, to 4,338 while the China enterprises index edged up 18 points, or 0.23 percent, to 8,303.

Up north, the benchmark Shanghai Composite Index opened down five points, or 0.14 percent, at 3,879.

The Shenzhen Component Index was 22 points, or 0.17 percent, lower at 13,362 while the ChiNext Index was down four points, or 0.14 percent, at 3,280.

Yemen's Iran-aligned Houthis launched a new attack on Saudi Arabia on Monday, after Riyadh blamed Iran-backed fighters in Iraq for an attack on the kingdom's east-west pipeline that it said could disrupt as much as four percent of global oil supplies.

Gulf Arab states also postponed planned talks with Iran.

Renewed supply concerns kept markets on edge, with US crude rising 1.27 percent to US$102.68 a barrel while Brent was up 1.21 percent to US$106.96 per barrel.

"Markets are likely to remain focused on the risk that higher crude oil prices could add to inflationary pressures and, in turn, push interest rates higher," said ⁠Yokoo Akihiko, an analyst at Mitsubishi UFJ Bank, in a note.

Calls by leading AI figures to ⁠slow development continued to reverberate through markets even as US President Donald Trump played down concerns over misuse of the technology, saying existing US safeguards were adequate and that China would benefit from doubts over AI development.

In Tokyo, the Nikkei opened 302 points, or 0.48 percent, lower at 63,190 before reversing direction to be 586 points higher to give traders a better appetite at lunchtime.

In Seoul, the Kospi clawed back early losses after opening 25 points, or 0.38 percent, down at 6,659 to hover a few points around the break even mark before noon as bargain hunting in chip stocks followed a three-session slide.

"While inflation continues to decelerate, recent upside surprises mean the pace of disinflation has been slower and less convincing than" the Fed likely requires, analysts at Morgan Stanley said in a report, expecting a 25 basis-point hike on Wednesday and in December.

"We see arguments for both a hike and a hold, but signs of second-round effects from energy prices, strong demand tied to AI-related investment, a neutral rate that is possibly temporarily higher, and concerns about credibility mean the balance of risks now argues for a somewhat more restrictive policy."

Overnight, benchmark 10-year US Treasury yields touched five percent for the first time since 2023, while Germany's ⁠10-year bond yield climbed above 3.51 percent, its highest level since 2009.

On Tuesday, Japan's benchmark 10-year government bond yield popped back to three percent.

The Bank of Japan is widely expected to raise its interest rate by 25 basis points to 1.25 percent at the end of its two-day meeting on Friday and signal more tightening ahead.

Policymakers are seeking to shore up the yen after intervention helped steer the currency away from a 40-year low. (Reuters/Xinhua)


Edited by Tony Sabine