Asian stocks continue to gain, supported by artificial intelligence and declining oil prices

Asian stocks headed towards recording gains for the sixth consecutive session on Wednesday, driven by continued consumer demand for artificial intelligence applications, which supported technology company stocks, while oil prices continued to decline, amid reports of a possible increase in supplies from the Middle East.

In the United States, President Donald Trump said that talks with Iran in New York had made progress, before he later threatened to eliminate the country if an agreement was not reached, according to Reuters.

Iranian President Masoud Pezeshkian is scheduled to deliver a speech before the United Nations General Assembly later, Wednesday, while markets await reports of the possibility of holding talks between him and Trump.

Brent crude futures fell 0.9 percent to $98.37 per barrel, while US West Texas Intermediate crude fell 1.3 percent to $89.32 per barrel.

Chinese President Xi Jinping will arrive in Washington later today, amid speculation about the possibility of extending the trade truce between the two countries, in addition to the possibility of cooperation in the field of artificial intelligence.

Renewed interest in artificial intelligence helped South Korean stocks rise 0.5 percent, with Samsung shares rising more than 2 percent, while Taiwanese stocks rose 0.7 percent, approaching record levels.

The broader MSCI index of Asia-Pacific stocks excluding Japan rose 0.3 percent, recording gains for the sixth consecutive session, while Chinese blue-chip stocks fell 0.5 percent.

Japanese markets were closed due to a public holiday, but Nikkei futures contracts recorded 66,735 points, an increase of approximately 1,700 points from the closing level of the cash index on Friday.

Chris Weston, head of research at brokerage firm Pepperstone, said that the markets expect “a strong opening in Japan tomorrow, with an additional decline in oil prices, stabilization of interest rate and Treasury markets, while the Nasdaq spot and futures markets record new record levels.”

He added, "Memory stocks led the market, supported by another strong session for the semiconductor sector, which recorded gains for the sixth day in a row."

Consumers are aggressively moving towards artificial intelligence agents

The data equipment sector received a boost from strong consumer demand for Meta's artificial intelligence agent, Muse, which topped the app download charts in the United States over the past two weeks.

Analysts are now looking to evaluate the performance of a similar product from Google Labs called “CC,” and the extent of its ability to attract consumers.

Attention was also drawn to the levels of demand for the SoftBank debt deal, which exceeds $10 billion, which reportedly attracted interest requests exceeding $20 billion, which could make it one of the largest high-risk bond deals ever.

On Wall Street, futures contracts for the Standard & Poor's 500 and Nasdaq indexes rose slightly.

In Europe, futures contracts for the Euro Stoxx 50, DAX and Financial Times indices rose by about 0.4 percent each.

The decline in oil prices contributed to pushing US Treasury bond futures slightly higher, with the 10-year bond yield remaining below 5 percent.

On the other hand, the two-year bond yield rose again to its highest level since mid-2024 at 4.7879 percent, with investors pricing in the possibility of additional tightening of monetary policy by the Federal Reserve.

Richmond Federal Reserve Chairman Tom Barkin and Boston Federal Reserve President Susan Collins on Tuesday expressed their support for raising interest rates last week, in light of continuing concerns about inflation.

Futures markets indicate a 54 percent probability that the Federal Reserve will raise interest rates again next October, while markets are currently pricing in an additional tightening of 33 basis points by the end of the year.

Expectations of higher interest rates helped push the dollar to its highest levels in several weeks against the euro, the British pound, and the Canadian dollar, which strengthened its position from a technical standpoint. The euro settled at around $1.1430, near its lowest level in two months.

Analysts pointed out that Trump's call to ban US diesel exports may constitute negative news for inflation in Europe. Due to the region's dependence, to a large extent, on fuel shipments coming from the United States.

Europe is already facing a shortage in natural gas supplies, which may push energy prices higher during the winter.

The dollar rose slightly against the yen to 157.60 yen, while speculators are wary of the possibility of Japanese authorities intervening again if the US currency exceeds the level of 160 yen.

In commodity markets, gold fell 0.3 percent to $4,341 per ounce, while copper approached record levels, after rising by about 18 percent since the beginning of the year.

The prices of copper and other industrial metals fell during trading on Wednesday, under pressure from the rise in the US dollar, which increased the cost of purchasing goods denominated in the US currency for importers around the world.

The benchmark copper price for three-month contracts on the London Metal Exchange fell by 0.66 percent, reaching $14,651 per metric ton by 03:00 GMT. The most traded copper contract on the Shanghai Futures Exchange also fell by 0.23 percent to 110,960 yuan ($16,550.57) per ton, according to Reuters.

This decline came after the rise of the US dollar during volatile trading on Tuesday night, amid mixed effects resulting from the volatility of oil prices and the continued state of geopolitical uncertainty.

The rise of the dollar usually puts pressure on the prices of commodities in which it is denominated, such as copper. It becomes more expensive for buyers using other currencies.

Despite this pressure, the market is still supported by strong demand in China, the world's largest copper consumer. The Yangshan Premium index, which measures China's appetite for importing copper, fell to $117 per ton on Tuesday, but was still 62.5 percent higher than at the beginning of this month.

Chinese demand was supported by pre-emptive purchases before some smelters stopped working during the upcoming official holidays, scheduled between September 25 and 27, in addition to the Golden Week holiday extending from October 1 to 7.

Copper prices have also benefited over the past months from increased imports to the United States, in anticipation of possible tariffs on refined copper. However, this support declined after a report indicated concerns among US officials that the potential tariffs would lead to increased production costs for local manufacturers.

In this context, analysts at the Chinese brokerage company Jinrui Futures explained that “weekly US imports have begun to decline,” indicating the decline of one of the most prominent factors supporting the market.

In other metal markets, nickel rose on the Shanghai Stock Exchange by 1.16 percent, after its prices rose on the London Stock Exchange on Tuesday evening, following the announcement of the “Indonesia Morowali Industrial Complex”, one of the largest nickel production centers in Indonesia, that the lack of water supplies forced some smelters to reduce the production of iron ore containing nickel.

As for the London Metal Exchange, aluminum fell by 0.63 percent, zinc by 0.68 percent, lead by 0.52 percent, nickel by 0.43 percent, and tin by 0.38 percent.

On the Shanghai Stock Exchange, aluminum fell by 0.14 percent, zinc by 0.47 percent and lead by 0.4 percent, while tin recorded a slight increase of 0.11 percent.

Sri Lanka's economy has shown its ability to withstand a series of shocks, recording strong growth during the second quarter of the year, despite inflation rising to 8 percent on an annual basis in August as a result of the shock of high global oil prices, according to the International Monetary Fund, warning that the continuation of the war in the Middle East, global trade policies and the "El Niño" phenomenon keep the risks surrounding the economy tilted to the downside.

At the conclusion of a visit to Sri Lanka that lasted from September 10 to 23, a team of Fund experts said that economic activity grew 4.2 percent in the second quarter of 2026, recording 11 consecutive quarters of strong growth, while total official reserves rose to $6.9 billion by the end of August.

The Fund indicated that inflation expectations remain broadly stable, while banks maintain good levels of capital and profitability, and financial results during the first half of the year were strong, and the debt restructuring process is close to completion.

War and trade weigh on expectations

Despite the improvement in economic indicators, the Fund warned of risks related to uncertainty about the duration and intensity of the war in the Middle East, in addition to developments in global trade policy and the effects of the “El Niño” phenomenon.

The head of the Fund’s mission to Sri Lanka, Ivan Papagiorgio, said that maintaining macroeconomic stability in an environment vulnerable to shocks requires a firm commitment to prudent policies and reforms, with the aim of rebuilding financial and external margins, maintaining price stability, and strengthening governance, in addition to strengthening social safety nets to protect the most vulnerable groups.

The Fund called for developing and implementing a medium-term revenue strategy with the aim of enhancing government revenues, improving the efficiency and fairness of the tax system, expanding the tax base, rationalizing exemptions and incentives, in addition to strengthening revenue management to improve tax compliance and achieve sustainable gains.

He also stressed the importance of continuing to price energy according to the principle of cost recovery, to reduce the financial risks resulting from state-owned companies, and to address obstacles that hinder the implementation of capital spending.

Maintaining the inflation target at 5%

In monetary policy, the Fund believed that the central bank must be prepared to deal with inflation pressures and maintain price stability within the framework of flexible inflation targeting.

He also called for greater flexibility in the exchange rate, to help absorb shocks and support the accumulation of reserves. He said it would be wise, when the first statutory review was carried out, to maintain the 5 per cent inflation target and the current accountability range.

The Fund explained that the current target provides Sri Lanka with the necessary flexibility in the face of large fluctuations in food and energy prices. Pointing out that moving to a lower target could be considered in the next review, after building a record of low and stable inflation.

From stability to transformation

The Fund stressed that the transition from the stabilization phase of the economy to the transformation phase requires continued momentum in structural reforms, to improve the business environment and attract investments, including trade liberalization, modernizing business and labor systems, expanding access to finance, and accelerating digital transformation.

He noted that establishing a record of sound policies and implementing reforms will help Sri Lanka strengthen its resilience, restore confidence in a sustainable manner, and raise living standards through strong and inclusive growth.

The Fund team’s visit came within the framework of the seventh review discussions of the Extended Fund Facility Program, in addition to the Article 4 consultations for the year 2026.

The Fund said that discussions will continue in the near future, with the aim of reaching agreement at the expert level on the policies and standards necessary to complete the seventh review.