Global Market Today: Asian shares trade lower; oil holds gains
Oil prices managed to retain their gains as optimism regarding a deal in the Strait of Hormuz dissipated, sparking renewed fears of inflation. Treasury yields increased, and the yen weakened, undoing some of its recent recovery. Asian stocks and futures suffered slight declines, while Australian bonds dropped before an impending policy decision.
Asian shares experienced a decline in trading, while oil prices maintained their gains. The advance in oil had a negative impact on Treasuries, causing the 10-year yield to rise by six basis points to 4.71% in the previous session. On Tuesday, there will be no cash trading in Treasuries in Asia due to a Japanese holiday.
The currency of the Japanese yen weakened by 1% on Monday, erasing nearly half of its recent rally that was supported by intervention. This drop is of psychological significance for traders, who remain vigilant for additional official support. In early trading on Tuesday, the yen was slightly stronger at around 159.17 per dollar.
Asian stocks and equity-index futures for US benchmarks experienced a slight dip. Government bonds from Australia also declined ahead of an anticipated policy-rate hold by the central bank. Gold continued its upward trend for the third consecutive day, trading near $4,400 per ounce.
The recent rally in oil prices, despite little progress in easing tensions in the Middle East, has reignited concerns about price pressures following softer-than-expected US jobs data on Friday. This dampened expectations for an imminent Federal Reserve interest-rate increase. The focus now shifts to Wednesday's US consumer price index report, which could provide further clues about the direction of interest rates.
Chris Larkin from E*Trade at Morgan Stanley noted that while the jobs report may have alleviated some concerns about a potential Fed rate hike next month, those worries might resurface if inflation figures are cooler than anticipated. The closely watched consumer price index is expected to increase by 0.1% in July, following a 0.4% decline in the previous month, according to the median projection from a Bloomberg survey of economists ahead of the Bureau of Labor Statistics' release on Wednesday.
Fed Bank of Cleveland President Beth Hammack suggested that multiple rate hikes might be required to bring inflation down to the target. She stated, "One 25-basis-point move probably doesn't do a whole lot for the economy. So it's probably some number, but I don't want to prejudge what that number is going to be."
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