Global financial markets shifted into risk-off mode on Friday after a sharp decline in South Korean equities triggered weakness in technology shares worldwide, while crude oil prices moved higher amid renewed fears surrounding disruptions in the Strait of Hormuz.
“Markets have lost momentum after President Trump said the US doesn’t need the Strait of Hormuz open ‘at all’,” strategists at Deutsche Bank said in a morning research note.
Government bond yields also climbed across major economies as inflation concerns intensified and demand for U.S. Treasury auctions remained soft. Investors were simultaneously evaluating the outcome of the summit between Donald Trump and Xi Jinping in Beijing.
Looking ahead, market participants are expected to monitor upcoming U.S. industrial production figures for April alongside the Empire State manufacturing survey for May.
KOSPI Slumps as Semiconductor Stocks Come Under Pressure
Asian stock markets recorded steep losses, led by South Korea, where the KOSPI dropped 6.1% after briefly surpassing the 8,000-point mark earlier in the session. The selloff spread through global semiconductor shares as investors locked in profits following strong gains in the sector.
Samsung Electronics declined 8.6%, while SK Hynix fell 7.7%. In premarket trading in the United States, memory-chip producer Micron Technology (NASDAQ:MU) lost 2.2%.
Chinese mainland equities proved relatively more resilient despite broader weakness across Asian markets.
Global Equity Markets Extend Losses
U.S. equity futures moved lower following the decline in Asia, with futures linked to the S&P 500 down 0.8% and Nasdaq-100 futures falling approximately 1.1%.
European markets also weakened. Germany’s DAX dropped 1.2%, while the UK’s FTSE 100 and France’s CAC 40 each declined around 1%.
Investor appetite for risk appeared to fade after several weeks of strong gains, while geopolitical uncertainty and rising bond yields continued to weigh on equities. In Britain, political developments also remained in focus after Keir Starmer came under renewed pressure following a parliamentary vacancy that could potentially allow Andy Burnham to return to Parliament.
Oil Prices Head Higher for the Week
Oil prices climbed roughly 3% on Friday and stayed on course for substantial weekly gains as the Strait of Hormuz effectively remained closed and diplomatic efforts to end the conflict showed little progress.
Brent crude futures rose around 2.9% to $108.75 per barrel, while U.S. crude futures advanced 3.2% to $104.42.
The latest gains followed comments from Trump stating he was “losing patience” with Iran, increasing concerns over a prolonged disruption to energy shipments through the Gulf region. Markets continue to react sensitively to developments around Hormuz, a key route for global crude exports.
“Notwithstanding the current prognosis of horrifically low oil inventories, it appears that the focus is progressively shifting towards demand destruction, hence the reluctance to revisit the March or April summits. Of course, such a jump cannot be ruled out in the event of an escalation,” said Tamas Varga of PVM Oil Associates.
Trump-Xi Talks Leave Investors Seeking More Detail
Trump departed Beijing aboard Air Force One after talks with Xi lasting more than two hours on Thursday. Although the meeting produced limited concrete policy announcements, investors were encouraged by the more constructive tone between the two leaders.
“We didn’t think any of the headlines from Trump’s trip were narrative-shifting at all,” Adam Crisafulli wrote in a market commentary.
Trump stated that both countries wanted the conflict involving Iran to end and repeated that Tehran should not acquire nuclear weapons. He also claimed the discussions had resulted in “fantastic trade deals,” although no additional details were disclosed. Chinese officials said the summit generated “a series of new common understandings.”
Markets also drew some optimism from indications that trade tensions between the United States and China could continue easing. Trump said bilateral relations would be “better than ever,” while Chinese state media reported Xi telling U.S. executives that China’s “doors to the outside world will open wider and wider.”
Bond Yields Rise Across Major Markets
Government bonds came under pressure globally, sending yields higher as investors reassessed inflation expectations and the outlook for central bank policy.
Strategists at Deutsche Bank noted that “the U.S. rates mood also wasn’t helped by lukewarm demand for the latest T-bill auctions as the Treasury increased auction sizes for the past couple of weeks.”
The yield on the U.S. two-year Treasury note climbed above 4.05%, while the benchmark 10-year yield approached 4.52%. In Japan, the 20-year government bond yield rose to its highest level since 1996 after stronger-than-expected producer price data reinforced expectations that the Bank of Japan may continue tightening monetary policy. European bond futures also moved lower.