South Korea stocks fall while Asian shares stay cautious as earnings loom, oil slips

Published Mon, Oct 12, 2026 · 10:31 AM

[SYDNEY] Asian share markets got off to a cautious start on Monday (Oct 12) as earnings season loomed as a challenge to sky-high tech valuations, while oil was choppy after strikes on shipping and airports in the Gulf.

There was considerable confusion about US President Donald Trump’s announcement of an energy ceasefire between Ukraine and Russia, which neither side had confirmed.

Trump’s proposal for Russia to increase its exports of diesel was also under fire from Republican and Democratic senators as potentially illegal.

Brent futures started higher but soon slipped 1.1 per cent to US$103.50 a barrel, away from the recent top of US$109.97, while US crude futures lost 1.2 per cent to US$90.73 a barrel.

South Korean stocks fell 1.1 per cent, while MSCI’s broadest index of Asia-Pacific shares outside Japan was little changed.

On Wall Street, S&P 500 futures edged up 0.2 per cent, while Nasdaq futures firmed 0.5 per cent. In Europe, Eurostoxx 50 futures firmed 0.4 per cent, while DAX futures gained 0.4 per cent and FTSE futures added 0.3 per cent.

Trade was thin with Japan markets shut and the US on a partial holiday ahead of the earnings season with major US banks kicking off on Tuesday.

S&P 500 earnings are expected to have jumped by more than 30 per cent in the third quarter, according to LSEG IBES, though the bulk of that comes from the tech sector.

My Bui, an economist at AMP, noted all the gains in the S&P 500 since mid-September had been in tech, while investors were demanding higher yields to fund the massive borrowing for artificial intelligence.

The US investment-grade credit default swap index, which tracks the cost of insurance against default, had also risen sharply to its highest level since the Iran war began.

“Overall, wider spreads suggest investors are questioning whether AI revenues can keep pace with rising borrowing costs,” added Bui.

“Corporate bond issuance to fund AI capex, combined with wider high-yield spreads, will raise refinancing costs as the current wave of debt matures over the next few years.”

US CPI to heat up, but core cooler

The flood of corporate debt has added to pressure in sovereign markets, driving Treasury yields to 24-year highs last week and lifting the discount applied to company earnings.

The market faces fresh challenges this week from US data on consumer and producer prices and retail sales. Rising energy costs are expected to lift consumer price index by a hefty 0.6 per cent to an annual 3.7 per cent, though the core is seen cooler at 0.2 per cent and 2.5 per cent.

“Oil prices remain higher than we had assumed as shipping costs have soared, and product prices are even higher,” said Bruce Kasman, head of global economics at JPMorgan.

“The signals on inflation point to a sharp rebound in headline inflation that will squeeze purchasing power and a firming in core inflation that will keep central banks focused on near-term hikes.”

Markets imply only an 18 per cent chance of a rate rise from the US Federal Reserve in October, but an 85 per cent chance of a hike in December. Investors are also wagering on hikes in the EU, Japan and UK before end-2026.

In currency markets, the euro remained on the defensive at US$1.1201 having fallen for five weeks straight amid concerns about government deficits in Europe.

The US dollar index held near 17-month highs at 102.25, but has stalled on the yen at 158.15 as the threat of Japanese intervention deters speculators for now.

In commodity markets, non-interest-bearing gold rose 0.3 per cent to US$4,206 an ounce, having managed to bounce more than 1 per cent last week. REUTERS