Asia stocks edge higher, oil up amid Gulf confusion

Asian stock markets followed Wall Street's upward trend on Monday, Aug 10, as a weaker-than-expected US jobs report reduced the likelihood of an imminent increase in interest rates. However, oil prices rose due to a lack of advancement in Gulf peace negotiations. Iran reported that a deal with Oman to establish new shipping lanes in the Strait of Hormuz was nearing completion, but stressed that the waterway would reopen only after the United States meets additional criteria.

Brent crude climbed 0.9% to $84.32 a barrel, while US crude surged 0.7% to $78.74 a barrel. The increased fuel costs heighten expectations for the upcoming US July consumer price report, where analysts anticipate a 0.1% rise in the headline and 0.2% increase in the core figure. Should any positive surprises emerge, it could reignite discussions about a Federal Reserve rate hike next month.

Michael Feroli, JPMorgan's chief US economist, indicated that the forecast for core CPI of 0.22% might not be sufficient to trigger a September Fed hike, but persistent reports closer to 0.3% could warrant such a move. The futures market has reduced the probability of a September rate hike to approximately 44%, down from 67% a week ago.

Treasuries benefited from the softer rate risk, surging and driving Wall Street to record highs. MSCI's Asia-Pacific index outside Japan climbed 0.3%. In Europe, EURO STOXX 50 and DAX futures fell slightly, while FTSE futures declined more noticeably. S&P 500 and Nasdaq futures remained largely unchanged, after experiencing significant gains last week due to strong earnings reports.

BofA analysts noted that earnings per share were up 30% year-to-date, excluding investment gains at Alphabet and Amazon. AI stocks showed significant EPS growth, with a 28% median increase compared to 12% for non-AI stocks. Analysts expect AI growth to moderate to 16% in the next quarter. The bond market saw a slight increase in 10-year Treasury yields at 4.673%, with the US preparing to issue $125 billion in new debt this week.

The dollar weakened against major currencies as investors remained cautious of potential Japanese yen intervention. Gold remained stable at $4,342 an ounce, having gained over 7% the previous week.