Stocks rise, yields ease as oil slips on Trump hint at short bombing campaign

Asian stocks experienced a notable rebound on Thursday, following a lackluster start to the week. This positive trend was accompanied by a decline in bond yields and oil prices, as a result of Donald Trump's hint towards a brief bombing campaign against Iran. The US strikes on Iranian targets in the Strait of Hormuz sparked a series of tit-for-tat exchanges between the two nations, which initially sent crude prices soaring by up to 10 percent.

Such flare-ups have raised concerns about mounting inflation and prompted central banks to consider rate hikes. However, the outlook improved after President Trump's reassurance that the bombing campaign could be short-lived, with Trump stating that he didn't think it would last too long.

The market sentiment was bolstered by the news that US military escorted 40 commercial vessels carrying 18 million barrels of crude through the Strait of Hormuz, a significant milestone in the event. Although the major oil benchmarks, Brent and West Texas Intermediate, had pared their gains by Wednesday, they edged lower on Thursday. The fresh US attacks, however, eased the selling pressure.

The positive developments contributed to the gains of all three major US indexes, and the same momentum was reflected in the Asian markets. Tokyo, Seoul, Hong Kong, Shanghai, Sydney, Singapore, Taipei, and Jakarta all saw an uptick in their stock prices. Additionally, weak US economic data, including private jobs creation falling short of expectations and job openings missing forecasts, helped ease pressure on the Federal Reserve to hike borrowing costs.

Investors are now focusing on the release of closely watched non-farm payrolls figures and next week's consumer price index, as these could play a crucial role in the Fed's decision-making before its September 16 rate decision. Despite the relief offered by the softer readings, Stephen Innes at Quintex Intel noted that the market is not celebrating weaker growth but rather rediscovering that slightly adverse news may be what it needs at the moment, particularly if the alternative entails a Fed feeling compelled to continue tightening into an oil shock.

Nevertheless, Trump's comments have alleviated some concerns over worst-case inflation fears, but geopolitical tensions remain a simmering issue. Observers are keeping a close eye on Japan, where a spike in the yen has led to speculation of further intervention by authorities. The currency climbed to 158.22 per dollar on Wednesday, following a period above 160 earlier in the day.