Asian Markets Rallied as Disappointing US Employment data Sent Strong Signals for Rate Cuts; Oil Prices Inch Closer to $50 a Barrel

Asian Markets Rallied as Disappointing US Employment data Sent Strong Signals for Rate Cuts; Oil Prices Inch Closer to $50 a Barrel

Sydney, 10 Aug [VoM News]: Asian equity markets advanced on Monday after worse-than-forecast US employment figures subdued expectations of an imminent US Federal Reserve interest rate hike, while oil prices climbed as uncertainties over transiting the Strait of Hormuz persisted.

Investor sentiment strengthened following the disappointing US employment figures, which diminished expectations of a hike in borrowing costs anytime soon. Markets now have a 44 per cent chance of a US rate hike this month, compared with 67 per cent last week.

Japan’s Nikkei was 0.6% higher and South Korea’s index was 0.5% higher. MSCI’s measure of Asia-Pacific shares excluding Japan was 0.3% higher.

The weaker jobs data on Wall Street helped the major US indexes to end at record highs on Friday, with easing Treasury yields and robust corporate earnings provide support.

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Oil prices however continued their ascent with the limited shipping through the strategic Strait of Hormuz. Brent crude rose 0.9 percent to $84.32 per barrel and US West Texas Intermediate (WTI) was up 0.7 percent to $78.74 per barrel.

Iran announced last Sunday that a deal was finalized with Oman concerning the opening of alternative shipping routes in the Strait of Hormuz. However, it insisted that the Strait of Hormuz would be reopened solely in accordance with Tehran’s preconditions, that is, once the U.S. Concede to Iran’s demands.

The increase in oil prices has put the spotlight on the upcoming US CPI, due out on Wednesday. Economists are forecasted a 0.1 percent increase in headline inflation in July, and a 0.2 percent rise in core inflation.

Analysts suggested a higher-than-anticipated inflation number could bring back expectations of a rate increase from the Fed later this year.

European shares, on the other hand, edged lower. EURO STOXX 50 and the DAX futures in Germany were down 0.1 percent each while FTSE futures was down 0.4 percent.

In the States, the S&P 500 futures slipped 0.1 percent and Nasdaq futures were unchanged after last week bullish run resulting from strong corporate earnings.

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As Bank of America highlights, with 90% of S&P 500 companies having released earnings, profit per share has risen by around 30% compared to a year ago, excluding investment profits at Alphabet and Amazon. The AI related stocks maintained their lead with median earnings growth of 28% compared to 12% for non-AI related stocks.

The earnings calendar for this week features the earnings reports of Applied Materials, Cisco and CoreWeave.

While the euro held near its highest level in seven weeks at $1.1557 against the greenback in currencies, the dollar was unmoved against the yen at 157.85.

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Gold prices remained steady at $4,342 per ounce, supported by lower bond yields and ongoing buying of safe-haven assets.

(Inputs from Reuters)