Asian share markets advanced on Monday, following Wall Street higher after a soft U.S. jobs report reduced expectations of a near-term rise in borrowing costs. The gains came despite renewed pressure in oil markets, as the lack of progress in Gulf peace talks kept attention focused on shipping through the strategically important Strait of Hormuz.
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. Shipping through the vital waterway remained at a trickle, contributing to higher crude prices and adding uncertainty to the market outlook.
Brent crude rose 1.0% to $84.40 a barrel, while U.S. crude gained 0.8% to $78.80. The latest increase in fuel costs comes ahead of the U.S. July consumer price report, due on Wednesday, with analysts expecting a 0.1% rise in headline inflation and a 0.2% increase in core inflation.
A stronger-than-expected inflation reading could revive expectations of a Federal Reserve rate hike next month. Michael Feroli, chief U.S. economist at JPMorgan, said his forecast for core CPI of 0.22% was probably not strong enough by itself to prompt a September rate increase, although repeated readings closer to 0.3% could change that assessment. He added that investors were watching for a rebound in core goods prices after a two-month period in which they had fallen.
Futures markets have sharply reduced expectations of a September move, with the probability now around 44%, compared with 67% a week earlier. The retreat in rate-hike expectations helped Treasuries rally on Friday and supported a record close on Wall Street.
Asian markets followed that momentum. Japan’s Nikkei rose 2.0%, while South Korea’s benchmark added 1.1%. MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.8%. Chinese blue chips, however, eased 0.4% after data showed consumer and producer inflation came in below forecasts in July, reinforcing concerns over weak domestic demand.
European markets were less buoyant, with EUROSTOXX 50 and DAX futures both down 0.1%, while FTSE futures fell 0.4%. S&P 500 futures were flat and Nasdaq futures gained 0.2%, following a 5% rise in the Nasdaq last week amid a series of upbeat corporate earnings reports.
Analysts at BofA said nearly 90% of S&P 500 results had been reported, with earnings per share up 30% year on year after excluding investment gains at Alphabet and Amazon. The 76% EPS beat rate matched the strongest level since 2021. Artificial intelligence remained the standout area, with median EPS growth of 28%, compared with 12% for non-AI-related stocks, although consensus expectations point to AI-related growth slowing to 16% next quarter.
Earnings releases are lighter this week but include semiconductor company Applied Materials, networking equipment maker Cisco and cloud infrastructure technology company CoreWeave.
In bond markets, the yield on 10-year Treasuries was slightly higher at 4.662%, as markets prepared for $125 billion in new issuance this week. The earlier decline in yields and broader improvement in risk sentiment had pushed the U.S. dollar lower, leaving the euro just below a seven-week high at $1.1554.
The dollar gained 0.2% against the yen to 158.23, although investors remained alert to the possibility of intervention if the yen weakened further. Bank of Japan policymakers warned that mounting inflation risks could require a nimble and faster-than-expected pace of interest rate increases, strengthening the case for a September hike.
Meanwhile, lower bond yields continued to support gold, which held at $4,320 an ounce after rising more than 7% last week.
