On the domestic front, industrial profits rose 15.5% year-on-year in the first quarter of 2026, up from 15.2% in January–February, underscoring the resilience of China’s industrial sector even as external risks cloud the global outlook. Meanwhile, early signs of stabilisation are appearing in producer prices after more than three years of deflationary pressure, easing cost burdens for industrial firms that have struggled with squeezed margins amid volatile input costs and softer demand.

Improved risk appetite across regional markets also supported the currency, with South Korea’s KOSPI pushing to new record highs. That strength in equities helped temper near-term demand for the dollar and contributed to a modest recovery in the won.

On the macroeconomic front, stronger-than-expected domestic growth provided an additional anchor for the currency, as it tempered expectations for imminent rate cuts by the Bank of Korea and lent further stability to the won’s outlook.

However, the upside for the won remains constrained. Persistently elevated energy prices continue to cloud Korea’s external position, with Brent crude trading above $107 per barrel and ongoing disruption risks in the Strait of Hormuz keeping import costs elevated. These factors are reinforcing inflationary pressures, particularly through oil and LNG channels, and limiting the scope for more pronounced gains in the currency.

BOJ Governor Kazuo Ueda faces the challenge of reaffirming the bank’s commitment to a gradual normalization of monetary policy in order to shore up the yen, which has come under pressure amid a surge in oil prices linked to the war involving Iran. Recent data showed that Japan’s core inflation accelerated for the first time in five months, rising to 1.8% in March from 1.6% in February, while headline inflation picked up to 1.5% from 1.3% over the same period.

Over the month, views on key business conditions worsened further: assessments of financial conditions deteriorated (-24.9 vs -19.2 in February), access to credit became more constrained (-7.1 vs -0.6), and expectations for order books weakened (-2.7 vs -0.1). At the same time, optimism surrounding the volume of business activity moderated, though it remained marginally positive (2.2 vs 3.5).

Looking ahead, the business outlook declined sharply. Expectations for the next three months turned pessimistic (-17.3 vs 37.4), while confidence for the year ahead, though still positive, eased substantially (11.7 vs 51.1), signaling growing uncertainty over the medium-term economic environment.

At the same time, BOJ Governor Kazuo Ueda faces the challenge of signaling the bank’s determination to continue normalizing monetary policy in support of the yen, which has come under renewed pressure from surging oil prices linked to the war involving Iran. Last week, Finance Minister Katayama reiterated that authorities retain a “free hand” to intervene in the foreign exchange market to stabilize the currency, emphasizing their readiness to take “decisive” action against speculative moves.

Upside momentum was limited, however, by investor caution ahead of April inflation data due later this week. In March, headline CPI eased to a three-month low of 3.48% but stayed within Bank Indonesia’s 1.5%–3.5% target band, keeping inflation risks in focus amid heightened global uncertainty stemming from the conflict in the Middle East.

Sector-wise, basic materials, financials, and cyclical stocks led the advance, while energy and healthcare underperformed. Notable gainers included GojekTokopedia (+3.9%), Bumi Resources (+3.7%), Mitra Adiperkasa (+2.7%), and Vale Indonesia (+2.2%).

At the same time, deflation moderated in furnishings, household equipment, and routine household maintenance (-2.2% vs -2.6%). By contrast, price growth slowed in miscellaneous goods and services (5% vs 6%), and prices declined in health (-0.3% vs 0.3%) and restaurants and hotels (-0.4% vs 0.9%).

Deflation persisted across several categories, including alcoholic beverages and tobacco (-1.3% vs -0.9%), clothing and footwear (-10.1% vs -7.7%), housing and utilities (-2% vs -1%), and recreation and culture (-18% vs -12.3%), while deflation in communication was steady at -1.3%.

On a monthly basis, consumer prices rose 0.4% in March, after a 0.5% decline in February.

Data released last week showed New Zealand inflation coming in above expectations and remaining outside the Reserve Bank of New Zealand’s 1–3% target band. Price pressures are also expected to build further in the second quarter, when the full impact of higher energy costs is reflected in the data, reinforcing expectations that the RBNZ may start lifting interest rates in the coming months.

Even so, caution persists as the conflict in the Middle East threatens to undermine New Zealand’s fragile economic recovery. Markets are now pricing in around a 60% probability of a 25 bps rate hike in May, with a further move in July fully priced in.

The data, measured on a year-over-year basis, compares price changes in the latest month to the same month a year earlier. In February, the CPI indicated that prices were only modestly higher than a year before, but the latest figure suggests that inflationary pressures have strengthened, with the current rate more than doubling from the earlier reading.

While the detailed drivers of the increase were not provided, the move from 0.50% to 1.10% YoY will be closely watched by market participants and policymakers as they assess the trajectory of price growth and its implications for monetary and fiscal planning in Bahrain.

China’s industrial sector has remained a central pillar of post-pandemic growth, supported in large part by resilient export activity. Recent figures also indicated that producer prices have finally turned positive after more than three years of deflation, providing additional relief to industrial firms.

At the corporate level, Shannon Semiconductor gained 4% after posting a sharp increase in first-quarter profits, buoyed by strong demand for AI-related electronics. By contrast, Kweichow Moutai dropped 3.8% amid signs of cooling domestic demand, which has pressured both sales volumes and pricing.

Investors are now focused on Australia’s March CPI report, due Wednesday, with headline inflation forecast to rise 4.7% year-on-year—well above the Reserve Bank’s 2–3% target range. Any upside surprise could reinforce expectations of a 25-basis-point rate hike at the RBA’s May 5 meeting. Futures markets currently assign an 80% probability to a third rate increase this year, taking the cash rate to 4.35%.

Hopes for a near-term diplomatic resolution dimmed after Donald Trump halted a planned initiative over the weekend, indicating that further negotiations would depend on Iran taking the first step. At the same time, oil prices surged, intensifying inflation concerns. Brent crude climbed about 2% to trade above $107 per barrel, reinforcing expectations that interest rates may stay elevated for longer.

Despite the recent pullback, palladium remains on a strong upward trajectory, advancing 4.08% over the past month and soaring 58.28% over the past year.

Technology stocks led the advance, with notable gains in Kioxia Holdings (up 3.5%), SoftBank Group (1.4%), Advantest (2.4%), Fujikura (4.3%), and Disco Corp (4.3%).

In corporate news, Fanuc surged more than 15% after posting strong earnings underpinned by solid demand for its factory automation and robotics segments, particularly in China and the Americas. By contrast, Nomura Holdings fell over 5% after missing fourth-quarter profit expectations, pressured by writedowns and losses in its European operations.

While a ceasefire has largely held since early April, efforts to revive peace talks between the US and Iran have stalled, and energy shipments through the Strait of Hormuz remain constrained. This ongoing disruption to energy supply continues to stoke inflationary pressures, bolstering the view that central banks will either keep interest rates elevated for an extended period or implement additional hikes.

In Australia, investors are focused on Wednesday’s release of the March CPI report, with headline inflation forecast to rise 4.7% year-on-year, well above the Reserve Bank of Australia’s 2–3% target range. Any upside surprise could cement expectations of a 25-basis-point rate increase at the RBA’s 5 May meeting. Futures markets currently imply an 80% probability of a third rate hike this year, which would take the cash rate to 4.35%.

The rise in crude prices dampened risk appetite, as investors grew concerned that persistent energy cost pressures could push back anticipated monetary easing. U.S. stock futures also slipped ahead of a packed week featuring multiple central bank meetings and a raft of major earnings releases.

Hong Kong equities underperformed most regional markets, with investors adopting a more defensive stance amid uncertainty over the future path of interest rates. Even so, semiconductor shares extended their gains from the previous session, led by SMIC, which rose 6.0%. Other notable movers included AIA Group, up 1.4%, Lenovo, up 1.3%, and Shenzhen Xunce Technology, up 1.4%.

State-owned enterprises recorded a firmer recovery, with profits rising 10.1% to CNY 619.6 billion, improving markedly from a 5.3% gain in January–February. Private firms remained the primary growth engine, though their profit growth slowed to 25.4% from 37.2%, reaching CNY 430.5 billion. Joint-stock companies also proved resilient, posting a 20.9% increase in profits to CNY 1,305.5 billion.

By sector, manufacturing led the gains, with profits up 19.1% to CNY 1,238.4 billion, followed by mining, which rose 16.2%, while utilities underperformed, recording a 3.2% decline. Among specific industries, mining support services saw profits soar 264.6%, accompanied by robust increases in non-ferrous metals (116.7%) and electronics manufacturing (124.5%).

In March alone, industrial profits grew 15.8% year-on-year, the fastest pace in six months.

Market participants were also cautious ahead of the release of March industrial production data later in the day, following a contraction in the previous month. In addition, investors are awaiting key macroeconomic indicators this week, including China’s PMI readings for insight into the outlook for Singapore’s largest trading partner, as well as U.S. Q1 GDP and March PCE inflation figures for further signals on the Federal Reserve’s policy trajectory.

Early notable decliners included Singapore Technologies Engineering (-1.1%), Jardine Matheson (-0.6%), Hongkong Land Holdings (-0.5%), UOB (-0.3%), and OCBC (-0.3%).