Global stocks rise as US data ease rate fears but fuel economic worries

Asian stocks largely rose on Monday, following a decline on Wall Street, as traders evaluated new data that dampened expectations for a US interest rate increase but hinted at a slowdown in the world's largest economy. The prospect that the Federal Reserve would refrain from tightening policy next month had lifted equities last week, driving the S&P 500 and Nasdaq to record highs, following closely watched reports of a weakening labor market and easing inflation, despite the latter still being above target levels.

However, figures released on Friday sparked concerns about the economy's well-being and prompted warnings that investors should exercise caution. Retail sales declined by 0.6 percent month-on-month in July, the steepest dip in over a year, while consumer sentiment plummeted due to households curbing spending and raising inflation expectations following the fallout from President Donald Trump's Iran war.

The combination of data—soft retail sales, declining consumer sentiment, and softer inflation—hinted at a potential slowdown in US economic momentum, increasing the likelihood that the Federal Reserve might maintain rates unchanged in September. Traders now estimate the chances of a Fed hike at one in four, down from 50:50 last week, according to Bloomberg.

While US economic worries persist, Asian investors remain cautiously optimistic, with tech firms benefiting from a rebound after July's downturn. Tech giants Alibaba, Tencent, and JD.com led Hong Kong's gains, while Shanghai and Taipei also saw an uptick. Tokyo experienced a surge as chipmaker Kioxia surged more than 15%, and SoftBank, Advantest, and Tokyo Electron added between 1.6% and 2.6%.

Data from Japan showed its economic growth lagging forecasts in the second quarter, but other markets, including Shanghai, Taipei, Singapore, and Bangkok, rose alongside London and Frankfurt. Sydney, Wellington, Mumbai, and Manila slipped. The dollar experienced a dip against its peers following its decline on Friday in response to the new data.

Oil prices fell after a 1% increase on Friday, as the US and Iran continued their conflict and showed no signs of reaching an agreement to reopen the Strait of Hormuz. Iran's Deputy Foreign Minister Kazem Gharibabadi asserted that the Strait of Hormuz, which Tehran effectively closed at the start of the Middle East war, will remain under Iranian control.

The ongoing crisis could potentially prolong the conflict, keeping oil prices high and putting pressure on inflation.