Stocks slip in Asia as oil climbs, bonds retreat

Stocks declined across Asia on Monday as oil prices surged, causing bonds to lose value ahead of a week of economic announcements. President Donald Trump opposed an Iranian plan to reopen the Strait of Hormuz, citing Iranian desperation to make a deal, with talks expected to continue this week. Brent crude futures rose 2.1% to $106.49 a barrel, marking an 18% gain this month, while US crude futures increased 1.5% to $93.84 a barrel.

The scarcity of refining capacity lifted diesel prices to record highs, potentially embedding inflation into pricing and wage decisions. Central banks responded with a series of rate hikes, with the Reserve Bank of Australia likely to tighten next. Markets projected a 66% chance of a second consecutive Federal Reserve rate hike in October, with around 90 basis points of tightening expected by late next year.

Despite strong US economic data, bond yields have risen, supporting equities. The Atlanta Fed's GDPNow forecast anticipates a rapid 5.0% growth for the current quarter. The global economic expansion shows broad-based strength, according to JPMorgan Chief Economist Bruce Kasman. Notably, Japan's Nikkei index remained unchanged, South Korea's stocks fell 2.4%, MSCI's Asia-Pacific index excluding Japan declined 0.6%, and Chinese blue chips slipped 1.4%, down over 5% for the month.

On Wall Street, S&P 500 futures dropped 0.3%, Nasdaq futures fell 0.5%, and EUROSTOXX 50 futures increased 0.4%, while DAX futures rose 0.3% and FTSE futures climbed 0.2%. Yields on 30-year Treasuries edged up to 5.5185%, nearing their highest since 2004, while two-year yields surged 55 basis points this month, anticipating Federal Reserve hikes.

Higher yields increase borrowing costs worldwide, impacting tech firms financing AI expansion and reducing the discount on company earnings. US economic data, including September payrolls and inflation, will be released, with the dollar index nearing two-month peaks at 101.39 and the euro slipping to $1.1380.