Asia shares bounce, others cautious as oil rises

Asian shares experienced a surge on Monday (Sep 7) following the release of a strong US jobs report, which was perceived as a positive sign for global growth, despite the possibility of interest rate hikes. Concurrently, oil prices experienced a slight increase after both the US and Iran targeted ships in the Gulf. Iran announced the establishment of a restricted zone outside the Strait of Hormuz in the near future, following the US military's attack on three Iranian tankers and the Islamic Revolutionary Guard Corps' launch of ballistic missiles at two US Navy vessels.

As a result, Brent crude oil rose by 0.2% to reach $96.45 per barrel, having climbed nearly 10% in the previous week, while US crude climbed by 0.4% to $91.85 per barrel.

The potential for higher US consumer prices, driven by the inflationary effects of rising bond yields, has heightened the significance of an upcoming key reading of US consumer prices due on Friday. This development has also contributed to the European Central Bank's likelihood of raising interest rates to 2.75% on Thursday. Futures indicate a 75% chance of another rate hike to 3% by December.

The risk of hawkish guidance from the European Central Bank following the rate increase kept European stocks on edge on Monday, with Eurostoxx 50 and Dax futures decreasing by 0.1%, while FTSE futures remained flat.

On Wall Street, the absence of a US holiday led to relatively low trading activity. Both S&P 500 futures and Nasdaq futures closed slightly lower. The US August Consumer Price Index (CPI) report, scheduled for release on Friday, is anticipated to show a 0.2% increase in the core CPI, with a potential rise of 0.3%. In Asia, Japan's Nikkei rebounded by 2% after a similar decline in the week ended Sep 6, while South Korea surged by 3%.

MSCI's comprehensive index of Asia-Pacific shares outside Japan also rose by 0.9%. However, rising bond yields remain a challenge for equity valuations, with Treasury 10-year yields nearing their highest level since late 2023 at 4.784%.