Asia Stocks Rise, Oil Climbs Amid Gulf Tensions and Fed Uncertainty
Asian Stocks Gain; Oil Rises on Gulf Tensions and US Rate Speculation
Market Movements and Economic Influences
By Wayne Cole
SYDNEY, Aug 10 (Reuters) – Asian share markets tracked Wall Street higher on Monday after a soft U.S. jobs report pared the risk of a near-term rise in borrowing costs, though a lack of progress in Gulf peace talks saw oil prices creep higher.
Gulf Tensions and Oil Prices
Iran said on Sunday that a deal with Oman defining new shipping lanes in the Strait of Hormuz was in its final stages but reiterated that the waterway would only reopen once the United States met other conditions.
Brent crude added 0.6% to $84.04 a barrel as shipping through the vital waterway remained at a trickle, while U.S. crude rose 0.5% to $78.56 a barrel. [O/R]
Impact on US Inflation and Federal Reserve Policy
The latest revival in fuel costs raises the stakes for the U.S. July consumer price report due on Wednesday where analysts are looking for a rise of 0.1% in the headline and 0.2% for the core.
Any upside surprise could rekindle speculation of a hike from the Federal Reserve next month.
“Our forecast for core CPI of 0.22% is probably not quite firm enough to prompt a hike from the Fed at the September meeting, though repeated prints closer to 0.3% could do it,” said Michael Feroli, chief U.S. economist at JPMorgan.
“One thing we are watching for is any rebound in core goods prices after a two-month stretch in which they fell.”
The futures market has scaled back the chance of a September move to around 45%, from 67% a week ago.
Asian and Global Stock Market Performance
The pullback in rate risk helped Treasuries rally on Friday and saw Wall Street close at record highs. Japan’s Nikkei followed that lead to rise 2.0%, while South Korea added 0.8%.
MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.7%.
Chinese blue chips eased 0.7% after data showed consumer and producer price inflation came in under forecasts in July, underlining the softness of domestic demand.
European and US Futures
DOUBLE-DIGIT EARNINGS GROWTH
For Europe, EUROSTOXX 50 futures and DAX futures were both flat, while FTSE futures fell 0.4%.
S&P 500 futures gained 0.1%, while Nasdaq futures firmed 0.3%, having climbed 5% last week amid a slew of upbeat earnings reports.
Corporate Earnings and Outlook
Analysts at BofA noted that with nearly 90% of S&P 500 results in, earnings per share were up 30% on the year after excluding investment gains at Alphabet and Amazon. A 76% EPS beat rate matched the strongest level since 2021.
“AI remains the stand out, with median EPS growth of 28% versus 12% for non-AI-related stocks, though consensus expects AI to slow to 16% next quarter,” they said in a note.
Analysts at JPMorgan revised up their 2026 EPS estimate to $365, marking annual growth of 35%, and lifted their S&P 500 price target to 8,000 from 7,800.
Earnings are lighter this week but include semiconductor company Applied Materials, networking equipment maker Cisco and cloud infrastructure technology company CoreWeave.
Bond, Currency, and Commodity Markets
In bond markets, yields on 10-year Treasuries were a shade higher at 4.662% with the market bracing for $125 billion in new issuance this week.
The drop in yields and general improvement in risk pulled the U.S. dollar broadly lower, with the euro just off a seven-week top at $1.1553.
The dollar added 0.3% on the yen to 158.35, though investors were still wary of intervention should they push the yen down too far.
Central Bank Perspectives
Bank of Japan policymakers warned of mounting inflation risks that could require a nimble, faster-than-expected pace of interest rate increases, a summary of opinions at their July meeting showed, boosting the case for a September hike.
Commodities Update
In commodity markets, the drop in yields helped non-interest-paying gold hold at $4,333 an ounce, having climbed more than 7% last week. [GOL/]
(Reporting by Wayne Cole; Editing by Shri Navaratnam and Stephen Coates)
