Asian stocks edge higher, oil up amid Gulf confusion

Asian share markets followed Wall Street higher on Monday, after a soft US jobs report reduced the risk of a near-term rise in borrowing costs, according to wire material. However, a lack of progress in Gulf peace talks caused oil prices to creep higher. Iran reported that a deal with Oman to define new shipping lanes in the Strait of Hormuz was nearing completion, but reiterated that the waterway would only reopen once the United States met other conditions.

Brent crude rose 0.9% to US$84.32 a barrel, while US crude increased 0.7% to US$78.74 a barrel. The latest fuel cost surge heightens the significance of the upcoming US July consumer price report due on Wednesday, where analysts anticipate a 0.1% increase in the headline and 0.2% for the core. JPMorgan's chief US economist, Michael Feroli, stated that the forecast for core CPI of 0.22% may not be strong enough to trigger a Federal Reserve hike at the September meeting, but continued prints nearing 0.3% could lead to a rate increase.

The futures market has lowered the probability of a September rate move to around 44%, down from 67% a week ago, contributing to a decline in rate risk and driving Treasuries higher, which in turn led Wall Street to close at record highs on Monday. Japan's Nikkei and South Korea's Kospi both rose 0.6% and 0.5% respectively, while MSCI's Asia-Pacific index outside Japan gained 0.3%.

On the European side, the EUROSTOXX 50 and DAX futures both fell 0.1%, while the FTSE fell 0.4%. The S&P 500 futures declined 0.1%, and the Nasdaq futures remained unchanged after a 5% increase the previous week due to positive earnings reports. BofA analysts noted that with nearly 90% of S&P 500 results in, earnings per share increased 30% year-over-year, excluding investment gains at Alphabet and Amazon.

Around 76% of earnings per share beats matched the highest level since 2021. Notably, AI companies led the growth, with a 28% median EPS growth compared to 12% for non-AI related stocks. Consensus expects AI growth to slow to 16% in the next quarter. In bond markets, 10-year Treasury yields were marginally higher at 4.673%, with the market preparing for a US$125 billion new issuance this week.

The drop in yields and overall risk improvement pulled the US dollar lower, with the euro nearing a seven-week high at US$1.1557 and the dollar remaining flat against the yen at 157.85.