Asian Stocks Rise, Oil Holds Steady Amid Ongoing Middle East Uncertainty
By Wayne Cole
Market Movements and Geopolitical Developments
Asian and Global Stock Performance
SYDNEY, May 4 (Reuters) - Shares edged higher while oil prices flatlined in Asia on Monday, as investors drew comfort from signs of patchy progress in settling the Middle East conflict at the start of a week packed with earnings and key economic data.
Middle East Tensions and Oil Prices
President Donald Trump said the United States would begin an effort to free up ships stranded in the Strait of Hormuz on Monday morning, but gave no details of the plan.
A statement from Central Command said support would include guided-missile destroyers, over 100 land and sea-based aircraft and 15,000 service members.
Iran earlier said that the U.S. had responded to its 14-point proposal via Pakistan and that it was reviewing the response, though Trump said it was unlikely to be acceptable.
Brent crude futures were flat at $108.30 per barrel, having recovered from an initial drop of more than 2%, while U.S. crude was steady at $102.01.
Dealers noted a bulk carrier had reported being attacked by multiple small craft while transiting Iran's Sirik on Sunday, and it was not clear how many ships would try and run the Strait of Hormuz even with Navy protection.
Regional Market Reactions
A holiday in Japan made for thin trading conditions, leaving Nikkei futures up only modestly at 59,630 versus a cash close of 59,513. MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.6%, while South Korean stocks returned from holiday with a jump of 2.6%.
EUROSTOXX 50 futures and DAX futures each added 0.1%, while FTSE futures dipped 0.4%.
S&P 500 futures and Nasdaq futures were little changed, as markets braced for more than 100 earnings reports this week. Companies reporting include Advanced Micro Devices, Super Micro Computer Inc, Palantir, Walt Disney and McDonald's.
Corporate Earnings Outlook
The S&P 500 EPS growth rate was running at 25%, and accounting for one-off gains at a still brisk 16%, said analysts at Goldman Sachs in a note.
"Despite elevated energy prices and geopolitical uncertainty, corporate guidance and analyst estimate revisions have remained strong so far this quarter," they said. "However, the reward for EPS beats has been unusually small."
Central Banks and Inflation Concerns
AI Capex and Inflation Risks
Concerns remained about the scale of AI capex investment which was now up at $751 billion for 2026, $80 billion above estimates at the start of the earnings season and 83% above spending in 2025.
The threat of oil-driven inflation had also lifted bond yields in a challenge to equity valuations, while several major central banks had turned hawkish on policy.
Interest Rate Expectations
Markets implied just 2 basis points of easing from the Federal Reserve by year-end compared to 11 basis points a week ago. Expectations for the European Central Bank had climbed to 76 basis points of hikes, with the Bank of England on 63 basis points.
Australia's central bank meets on Tuesday and is considered likely to hike its cash rate for a third time running as it battles stubborn inflationary pressures.
Upcoming Economic Data
The outlook for Fed policy could be budged by a raft of data this week which includes the payrolls report for April on Friday. Median forecasts are for a rise of 60,000 in jobs following March's outsized 178,000 gain, though problems with seasonal adjustment make for much uncertainty.
Analysts at Citi, for instance, are predicting a 15,000 drop in payrolls, and a rise in unemployment to 4.3%.
Currency and Commodity Markets
Dollar and Major Currencies
In currency markets, the dollar was a shade softer as investors waited for more developments in the Middle East and, crucially, whether the Strait of Hormuz could be opened.
The dollar was off 0.1% at 156.94 yen, still smarting from last week's Japanese intervention which analysts thought could have amounted to around $35 billion.
The euro was flat at $1.1723, while the pound held at $1.3575 ahead of local elections in the UK which could see heavy losses for the ruling Labour Party.
Gold and Other Commodities
In commodity markets, gold was 0.2% lower at $4,603 an ounce, and well within recent trading ranges. [GOL/]
(Reporting by Wayne Cole;)
