On Monday, South Korea's Kospi index came under pressure right at the open, with losses at one point widening to 3%. That decline ranked as the steepest among major Asia-Pacific markets, clearly underperforming Hong Kong and Australian shares over the same period. Net foreign capital outflows, cooling enthusiasm for the AI trade and the approaching end of major buyback programs 鈥?these overlapping factors have left South Korean equities struggling to find buying support.

At the same time, U.S. equity futures were broadly steady, with S&P 500 futures up about 0.3% and Nasdaq 100 futures posting a similar gain, as attention shifted to this week's kickoff of big-bank earnings season and upcoming inflation data.

Oil prices retreated on news of a Russia-Ukraine "energy ceasefire," with Brent crude falling 1.8% to $102 a barrel, briefly easing concerns about spillover from geopolitical risk.

South Korean Stocks Are the World's Worst Performer as Foreign Capital Flees

South Korea's Kospi fell 2.6% on Monday, with the small-cap Kosdaq slipping in tandem. Once the hottest vehicle for the global AI trade, the South Korean market is now undergoing a sharp cooldown. The Kospi led the world in the first half of the year but has dropped 22% in the second half, making it the worst-performing major global equity index.

Samsung shares fell more than 2%, while SK Hynix dropped about 1%.

According to Bloomberg, foreign investors have pulled a net $131 billion out of South Korean equities this year, the largest outflow among major Asian markets. Phillip Wool, head of portfolio management at Rayliant Global Advisors, said: "For most investors 鈥?especially those who only recently entered South Korea because of the memory chip trade 鈥?the easy money in this theme has already been made." He said his fund has taken profits on South Korean AI stocks and is now underweight both SK Hynix and Samsung Electronics.

Another pillar supporting South Korean equities is also wobbling. According to JPMorgan data, a combined share buyback program by Samsung and SK Hynix worth roughly 55 trillion won (about $41 billion) is nearing completion. Of the roughly $23 billion in buy orders in the South Korean market last month, repurchases by the two chipmakers accounted for the bulk. Once those buybacks end, the market will face a clear vacuum in buying demand.

In addition, ASML, the world's largest semiconductor equipment maker, announced a blanket 10% price increase on components for its South Korean customers. Samsung and SK Hynix have accepted the plan, and the higher prices will take effect in January next year. That further raises operating costs for South Korean chipmakers and adds pressure on the earnings side.

South Korean Weakness Has Not Dragged Down the Broader Asia-Pacific Market; U.S. Futures Edge Higher

The sharp selloff in South Korean stocks did not drag down the entire Asia-Pacific market.

At the same time, Australia's S&P/ASX 200 rose 0.8%. Japanese markets were closed for a public holiday. The MSCI Asia-Pacific index fell 0.2% overall, with the Kospi the main drag.

On the U.S. side, S&P 500 futures rose between 0.12% and 0.3%, Nasdaq 100 futures gained about 0.24% to 0.3%, and Dow futures added 28 points (about 0.05%). U.S. stocks ended higher overall last week 鈥?both the Dow and the S&P 500 notched their second weekly gain in three weeks, while the Nasdaq Composite rose for a fourth straight week.

Oil Retreats as the Russia-Ukraine "Energy Ceasefire" Becomes the Key Variable

In oil markets, Brent crude fell about 1.8% on Monday to $102.81 a barrel, after earlier climbing to $105.63 on news of a Houthi attack on Riyadh airport.

Yiping Liao, a portfolio manager at Templeton Global Investments, said on Bloomberg Television: "Our base case is that energy prices stay elevated in the near term. We do not think the Hormuz crisis will be resolved in the short term, at least not before the U.S. midterm elections."

Trump announced over the weekend that Russia and Ukraine had reached an "energy ceasefire," saying it was "effective immediately, agreed by both sides and not to be violated." Ukrainian President Zelensky subsequently said on social media that "Ukraine supports the ceasefire, and Russia should support it too." Oil prices reacted to the news, with losses widening.

In gold, spot prices rose for a third straight session, breaking above $4,200 an ounce.

U.S. Stock Focus: Earnings Season Begins, Inflation Data Awaited

This week's market focus shifts to big-bank earnings season, with Bank of America, Citigroup, Goldman Sachs, JPMorgan, Morgan Stanley and Wells Fargo all due to report results this week.

According to John Butters of FactSet, S&P 500 earnings growth for the third quarter is expected to reach 29.6%, which would mark the index's fourth consecutive quarter of profit growth above 25%.

Meanwhile, September CPI and PPI data will be released on Wednesday and Thursday respectively. The 10-year Treasury yield approached 5.4% last week, its highest level since 2002.

Rebecca Patterson, former chief investment strategist at Bridgewater and a senior fellow at the Council on Foreign Relations, said:

For now, rising interest rates are not yet being seen as a force that overwhelms the growth and earnings story. Stocks and bond yields can rise together. But if rates keep climbing amid continued central bank tightening, the risk that rates begin to dominate and weigh on equity market sentiment will rise.