Asian markets rise as soft US jobs data eases Fed rate hike fears; oil climbs on Hormuz tensions

Asian share markets rose on Monday, tracking gains on Wall Street after a weaker-than-expected US jobs report reduced expectations of a near-term interest rate hike by the Federal Reserve.

Japan’s Nikkei 225 gained 0.6 per cent, while South Korea’s Kospi rose 0.5 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.3 per cent.

The gains came after US Treasury yields fell and Wall Street closed at record highs on Friday as investors reassessed the outlook for US monetary policy following the July jobs data.

At the same time, oil prices moved higher as uncertainty over the reopening of the Strait of Hormuz persisted, keeping a key source of inflationary pressure in focus.

Brent crude futures rose 0.9 per cent to $84.32 a barrel, while US West Texas Intermediate crude gained 0.7 per cent to $78.74 a barrel.

Fed rate hike bets fall

The latest US employment data has reduced expectations that the Federal Reserve will raise interest rates at its September meeting.

The futures market now sees around a 44 per cent probability of a September rate hike, down sharply from 67 per cent a week ago.

The shift followed a softer US jobs report that prompted investors to reassess the strength of the economy and the likelihood of further monetary tightening.

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Attention has now turned to the US consumer price index report due on Wednesday.

Analysts expect headline consumer prices to rise 0.1 per cent in July, while core inflation, which excludes food and energy prices, is forecast to increase 0.2 per cent.

A stronger-than-expected reading could revive expectations of a September rate increase.

Hormuz uncertainty keeps oil prices elevated

Oil markets, meanwhile, remained focused on developments around the Strait of Hormuz, a critical route for global energy shipments.

Iran said on Sunday that an agreement with Oman to define new shipping lanes through the strait was in its final stages. However, Tehran reiterated that the waterway would reopen only after the United States met other conditions.

Shipping through the strait has remained at a trickle, keeping concerns over global oil supplies alive.

The uncertainty has added to fuel-price pressures at a time when markets are also assessing the implications of the latest US inflation data.

Any sustained rise in crude prices could complicate the Federal Reserve’s efforts to bring inflation towards its target and could make the central bank more cautious about cutting or holding rates.

US stocks remain supported by earnings

European markets were less upbeat on Monday. EUROSTOXX 50 and DAX futures each slipped 0.1 per cent, while FTSE futures fell 0.4 per cent.

S&P 500 futures were down 0.1 per cent, while Nasdaq futures were broadly flat after the index gained strongly last week.

Corporate earnings have remained a major support for US equities.

According to Bank of America analysts, with nearly 90 per cent of S&P 500 companies having reported results, earnings per share were up about 30 per cent from a year earlier after excluding investment gains at Alphabet and Amazon.

The EPS beat rate stood at 76 per cent, matching its strongest level since 2021, the analysts said.

Artificial intelligence remained the strongest growth area. Median EPS growth for AI-related companies stood at 28 per cent, compared with 12 per cent for non-AI companies.

However, analysts expect AI-related earnings growth to slow to 16 per cent in the next quarter.

The earnings calendar is relatively lighter this week, with results expected from semiconductor maker Applied Materials, networking equipment company Cisco and cloud infrastructure provider CoreWeave.

Dollar weakens, gold holds near record levels

In bond markets, the yield on the benchmark 10-year US Treasury was slightly higher at 4.673 per cent, with investors preparing for $125 billion in new US government debt issuance this week.

The recent decline in Treasury yields and improvement in risk appetite had pushed the US dollar lower against major currencies.

The euro was near a seven-week high at $1.1557.

The dollar was largely unchanged against the Japanese yen at 157.85, with investors remaining alert to the possibility of intervention if the yen weakens further.

Gold, meanwhile, remained supported by lower yields. Spot gold was around $4,342 an ounce after rising more than 7 per cent last week.

The precious metal has benefited from lower US rate expectations, while geopolitical uncertainty and concerns around global markets have also supported demand for safe-haven assets.

For investors, the week ahead will therefore hinge on two key developments: whether US inflation reinforces the recent decline in Fed rate hike expectations and whether there is any meaningful progress towards restoring normal shipping through the Strait of Hormuz.

With inputs from agencies.