Most Asian exchanges climbed on Monday, with Japanese and South Korean bourses recording the largest advances as investors balanced signs of diplomatic progress between the U.S. and Iran against a firmer dollar and the prospect that U.S. interest rates will remain higher for a longer period.
Strength in major technology names - particularly chipmakers and firms tied to artificial intelligence demand - was the principal driver behind the regionwide gains. Risk sentiment received a boost after Iranian officials reported some progress in quadrilateral talks with the U.S. in Switzerland on Sunday. Those comments helped diffuse near-term tensions following comments from President Donald Trump that had signaled a possible return to attacks on Iran.
S&P 500 futures pared some early losses in Asian trading after Tehrans remarks, reflecting improved risk appetite following the positive diplomatic signals.
Macroeconomic and policy backdrop
Despite the improved tone, caution remained among investors after the Federal Reserve struck a more hawkish-than-expected posture, indicating policymakers are prepared to keep rates higher for longer. Market participants are awaiting remarks from multiple Fed officials this week and U.S. core PCE inflation data for additional guidance on interest-rate trajectories.
Regional markets were also taking cues from last weeks gains on Wall Street, even as the stronger dollar and higher-rate expectations continued to temper some investor enthusiasm.
Japan and South Korea lead on tech strength
Japans Nikkei 225 jumped 2.3% to 72,900 points, while the TOPIX rose 1.3%, leaving both indexes hovering near record levels. The yen remained weak despite the Bank of Japans 25-basis-point rate increase last week, a dynamic that aided Japanese equities.
South Koreas KOSPI climbed 1.4%, extending its recent run and staying close to record territory as demand for technology stocks stayed robust. Sentiment around AI-linked opportunities continued to underpin chip-sector gains, and investors are also looking ahead to South Koreas trade figures later in the week for further evidence of export strength.
SK Hynix Inc (KS:000660) was a notable outperformer, rallying nearly 6% to briefly overtake Samsung Electronics Co Ltd (KS:005930) as South Koreas most valuable company. Chip-related names in Japan also rose, reflecting optimism that the sector will be a primary beneficiary of the AI technology cycle.
China up, Hong Kong lagging; Australia soft ahead of domestic data
Chinese markets traded higher on Monday. The Shanghai Shenzhen CSI 300 gained 0.7% and the Shanghai Composite added 0.2% as investors searched for additional signs of policy support from Beijing and monitored upcoming economic releases.
Hong Kongs Hang Seng index underperformed regional peers, falling 0.8%. Local electric vehicle names were pressured after reports suggested the European Union was considering new restrictions on Chinese EVs, with BYD Co (HK:1211) among the larger decliners in the sector.
Australias S&P/ASX 200 eased 0.1%, lagging the broader regional rally ahead of key inflation and labor-market data scheduled later in the week. Those readings are expected to provide further context for the Reserve Bank of Australias outlook after policymakers recently signalled continued caution on inflation.
Investors are also awaiting Taiwan industrial production statistics, Singapore inflation data and U.S. core PCE inflation figures later this week for additional direction on global markets and interest-rate expectations.
Outlook
Markets moved higher in response to improved geopolitical signals and sector-specific optimism, particularly within technology and semiconductors. However, the prevailing narrative remains cautious as participants weigh central bank rhetoric, incoming economic data and currency moves for further confirmation of the path for interest rates.