Asia Markets Gain as Oil Rises on Gulf Uncertainty and Wall Street Rally
Market Overview and Key Drivers
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 0.9% to $84.32 a barrel as shipping through the vital waterway remained at a trickle, while U.S. crude rose 0.7% to $78.74 a barrel. [O/R]
Impact on Inflation and U.S. 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 look 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 44%, 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 and rose 0.6% on Monday, while South Korea added 0.5%.
MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.3%.
European and U.S. Futures
DOUBLE-DIGIT EARNINGS GROWTH
For Europe, EUROSTOXX 50 futures and DAX futures both dipped 0.1%, while FTSE futures fell 0.4%.
S&P 500 futures dipped 0.1%, while Nasdaq futures were little changed having climbed 5% last week amid a slew of upbeat earnings reports.
Corporate Earnings Highlights
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.
Earnings are lighter this week but include semiconductor company Applied Materials, networking equipment maker Cisco and cloud infrastructure technology company CoreWeave.
Bond and Currency Markets
In bond markets, yields on 10-year Treasuries were a shade higher at 4.673% with the market bracing for $125 billion in new issuance this week.
The drop in yields and general improvement in risk had pulled the U.S. dollar broadly lower, with the euro just off a seven-week top at $1.1557.
The dollar was flat on the yen at 157.85, with investors still wary of intervention should they push the yen down too far.
Commodities Update
In commodity markets, the drop in yields helped non-interest-paying gold hold at $4,342 an ounce, having climbed more than 7% last week. [GOL/]
(Reporting by Wayne ColeEditing by Shri Navaratnam)
