Oil prices and bond yields were higher in an uncomfortable combination for Asian equities on Tuesday, as investors braced for an interest rate hike in Australia and an era where short term borrowing costs settle at ⁠their highest for years. In Hong Kong, the benchmark Hang Seng Index opened up six points, or 0.02 percent, at 24,648 but plunged into the red soon after and was 131 points down at one stage in early trading. The tech index was down nine points, or 0.21 percent, at 4,286 while the China enterprises index was up 10 points, or 0.13 percent, at 8,227. On the mainland the Shanghai Composite Index opened down seven points, or 0.2 percent, at 3,816. The Shenzhen Component Index slid 19 points, or 0.15 percent, to 12,839 while the ChiNext Index inched down three points, or 0.11 percent, to 3,136. The mixed openings came as the benchmark 10-year US Treasury yield spiked to a 19-year high above 5.27 percent overnight for a rise of nearly 50 basis points through September. Yields rise when bond prices fall and the monthly selloff is the heaviest for two years. The US two-year yield has moved even further, shooting up more than 57 bps this month to the threshold of five percent, as traders figure that US growth and inflation will drive three more Federal Reserve rate hikes by the middle of next year. Sovereign yields are an anchor for global markets, a reference price for investing in riskier stocks and a benchmark for ⁠mortgages and corporate borrowing. Higher rates mean pressure on government, corporate and household budgets. Overnight only ⁠a massive US$150 billion boost to ⁠a buyback plan by chipmaker Nvidia, which lifted the stock price, held the rates-senstive Nasdaq to a fall of 0.9 percent. In Asia, bond markets in Japan, South Korea and Australia traded under pressure and most ⁠regional equity markets slipped. "The way to look at expected returns and overall bond yields going forward [is] we're coming to a new environment," said Angus Hui, head of fixed income at Fullerton Fund Management in Singapore. "Interest expenses are increasing as a part of the government budget in a lot of developed markets," he said, which means stretching sovereign finances and perhaps ⁠limiting a recovery for bonds should the global economy slow down. "Hence we think bond yields are unlikely to go back to the very good old days when bond yields were very, very low," he said. No sign of a breakthrough in Middle East left Brent crude futures at US$106.60 a barrel and climbing. Fragile sentiment in China's technology sector, where stocks were hit on Monday by US plans to ban Chinese components from data centres, left the blue chip CSI300 index pinned to a one-year low. The prospectus for US AI giant Anthropic illustrates the scale of the gamble on AI, with the company targeting a US$2 trillion valuation, but planning to spend US$518 billion ⁠on computing and infrastructure to build its transformative vision. Foreign exchange markets were broadly steady through the Asia morning on Tuesday, leaving the US dollar headed for a monthly gain. The yen rose on Monday when Japan's top currency diplomat said traders ought to heed the signal from Tokyo and Washington's united concern last week at yen weakness. It hovered at 157.31 per dollar, while the euro held at US$1.1367. The Australian dollar was steady at US$0.7012, with a Reserve Bank of Australia rate hike fully priced, along with another hike by February. "We question whether the ⁠governor can be sufficiently hawkish to frank the markets current mindset, especially if the decision is not unanimous," said Damien McColough and Uma Choudhury, rates strategists at Westpac, in a note. In Tokyo, the Nikkei opened lower by 319 points, or 0.49 percent, at 65,557, with its losses widening to 696 points at one stage before noon. In Seoul, the Kospi opened 45 points, or 0.66 percent, lower at 6,844 but regained ground to be around seven points under at one stage before lunch as strength in semiconductor ⁠stocks offset weakness elsewhere. (Reuters/Xinhua) Edited by Tony Sabine

Financial Secretary Paul Chan on Monday said Hong Kong would continue to support the Asian Infrastructure Investment Bank (AIIB) in helping members undertake preparatory work for infrastructure projects, creating favourable conditions for financing and smooth implementation to achieve development goals. The finance chief made the comments as he attended the AIIB's 11th annual meeting in Doha. Speaking at a governors' business roundtable, Chan said the AIIB could further promote knowledge and experience sharing among members, strengthen support for project planning and preparation, and help members enhance their project management and implementation capabilities to bring infrastructure projects to fruition. He said translating development needs into concrete projects requires not only financial support but also the capacity to plan and implement projects throughout their life cycle. The financial chief also delivered a keynote address on digital public infrastructure, citing Hong Kong's iAM Smart platform and Faster Payment System as examples. He noted that the rapid development of artificial intelligence was creating new opportunities to enhance the effectiveness of such infrastructure, while stressing the need to strengthen cybersecurity and data privacy. On the sidelines of the meeting, Chan met with Uzbekistan's Minister of Investment, Industry and Trade, Laziz Kudratov. He encouraged Uzbek enterprises to make use of Hong Kong's international financing platform, including listing opportunities for exchange-traded products and real estate investment trusts. Chan also met with the CEO of Qatar Development Bank, Abdulrahman Hesham Al-Sowaidi, to explore joint efforts to promote bilateral trade, support the development of start-ups in both places, and strengthen investment co-operation in venture capital. Edited by Tony Sabine

OpenAI is scrapping the release of GPT-6.1 Astra, a next-generation AI model planned for an October debut, over safety concerns raised by researchers during internal testing, the Wall Street Journal reported on Monday. The model, expected to appear in ChatGPT and Codex, was designed to handle more complex tasks without human assistance, the report said. Earlier this month, Anthropic CEO Dario Amodei called for the industry to slow the development of frontier AI models to allow safety measures to keep pace, a view endorsed by OpenAI CEO Sam Altman and SpaceX CEO Elon Musk. OpenAI did not immediately respond to a Reuters request for comment. The ChatGPT parent's safety chief Saachi Jain told the Journal on Monday that Astra fell short of the company's standards in alignment tests, which assess whether a system follows human intent. The model showed more deception than its predecessor, including at times failing to accurately disclose actions it had or had not taken, the report said. It also had problems with "scope authorisation", pushing ahead with tasks without requesting user permission and sometimes attempting to use external tools or services when doing so could be unsafe. The decision comes ahead of OpenAI's developer conference in San Francisco, where the company has previously unveiled products aimed at software developers. (Reuters) Edited by Cecil Wong

US air safety regulators are delaying certification of the 737 MAX 10 until determining a fresh software glitch poses no safety risk, a top official said on Monday. The problem stems from a cockpit software update to the 737 MAX that can cause an automated navigation feature to fail when planes shift their approach to landing. Shares of Boeing, which has staked its turnaround in part of MAX production growth, fell sharply Monday after a weekend Wall Street Journal article outlined the problem. While pilots are trained to safely land planes without the automated navigation system, regulators must evaluate whether the "workload" is excessive for pilots under such a scenario, said US Federal Aviation Administration (FAA) administrator Bryan Bedford. Bedford said Monday at a press conference that the MAX planes certified by FAA thus far are safe but that "we will be delaying the 10 until... we're satisfied we don't have an issue here." Earlier, an FAA spokesperson said the regulator "is working closely with Boeing and the airlines," adding that the FAA will convene an advisory board and "will take immediate action if it identifies a safety concern." The statements come after Boeing Chief Executive Officer Kelly Ortberg told a Wall Street conference on September 16 that he expected FAA certification of the 737 MAX 10 "very soon." A Boeing spokesperson said on Monday that, "we continue to follow the lead of the FAA as we work through the certification process." The problem surfaces when pilots alter their preprogrammed flight plan following a missed approach, according to Boeing. "Last month, we informed all 737 operators about a software issue where pilots may not have access to automated flight guidance during a specific landing scenario," a Boeing spokesperson said Monday in an emailed statement. "We shared information with operators that reinforced existing pilot procedures for safely handling such cases." Boeing engineers "are working on a software update to permanently address the issue," the spokesperson said. Boeing has staked its corporate turnaround in part on growth of 737 MAX production. The aircraft was grounded for 20 months through November 2020 following fatal MAX crashes in 2018 and 2019. Airlines have been eager to receive the 737 MAX 10, which, like other Boeing jets, has been heavily delayed by the company's safety problems. The FAA certified the smaller, long-delayed 737 MAX 7 on August 3. Bedford said the 737 MAX is "safe" to fly, describing the software issue as akin to an update for iPhone or a Microsoft product. In this instance, Boeing "fixed a known bug" but introduced "a new bug, smaller." Bedford described the issue as very different from the flaw that led to the two deadly MAX crashes. In those cases, a poorly conceived flight navigation system known as the Manoeuvring Characteristics Augmentation System (MCAS) took control of the aircraft. "The pilots remain in control of the airplane," Bedford said of the new software defect. "They train for these scenarios." Shares of Boeing finished at US$184.39, down 6.9 percent. (AFP) Edited by Cecil Wong

US stocks fell on Monday as oil prices and US Treasury yields increased, with investors weighing uncertainty over the prospects for an Iran war peace deal and the impact on the Federal Reserve's rate path. Crude prices had jumped after US President Donald Trump rejected a ⁠peace deal from Iran but pared gains on expectations that Qatari mediators would hold talks with the two countries to find a possible deal. After retreating from highs at the start of the month, oil prices have accelerated higher in recent days as hopes that a peace deal may be on the horizon have diminished. The rising prices of crude and diesel fuel have fanned inflation worries and pushed US Treasury yields higher, along with comments from Fed officials indicating that more rate hikes might be needed if price pressures fail to moderate after the central bank raised interest rates by 25 basis points earlier this month. "Iran is driving oil prices, and oil prices are driving inflation, and inflation is driving interest rates," said Jack Ablin, chief investment strategist and founding partner at Cresset Capital Management in Chicago. "We're getting to a point now where interest ⁠rates are looking pretty attractive relative to equities, which is really the first time in close to 20 years, so ⁠that's something that we're certainly paying attention to." The ⁠Dow Jones Industrial Average fell 347 points, or 0.7 percent, to 51,481, the S&P 500 lost 59 points, or 0.8 percent, to 7,683 and the Nasdaq Composite lost 248 points, or 0.9 percent, to 26,820. The decline for the S&P was its largest daily percentage drop since August 20. Boeing shares tumbled 6.9 percent as one of the biggest drags on the Dow after US Federal Aviation Administration said it will delay certification of Boeing's long-delayed 737 MAX 10 until a newly disclosed software issue is resolved. Bucking ⁠the broader trend was a 1.6 percent gain in Nvidia shares after the chip giant announced a US$150 billion share repurchase authorisation, the biggest-ever company share buyback. Iran announced a peace proposal at last week's United Nations General Assembly in New York, saying it had been relayed to the United States through Qatari mediators. While Trump said on Saturday he had rejected the offer, he told Axios on Sunday that he expected US negotiators to continue talks this week. Federal Reserve Governor Lisa Cook said on Monday she expects continued inflationary pressure in coming months stemming from AI-related demand and higher oil prices, though she stopped short of saying more interest rate hikes will be needed. Expectations for a rate hike from the Fed at its October meeting have climbed in recent days, in part due to economic data indicating the economy was growing at a solid pace. Markets are currently pricing in a ⁠70.3 percent chance for an increase of at least 25 basis points at the central bank's meeting next month, up from 57.6 percent a week ago and 17.7 percent a month earlier, according to CME FedWatch. (Reuters) Edited by Cecil Wong