Oil Rises With Hormuz Shut, Yen Gains After BOJ: Markets Wrap
(Bloomberg) — Oil extended its daily rally to the longest in a month, while equities drifted amid little progress on reopening the Strait of Hormuz. The yen edged higher after the Bank of Japan kept its policy rate unchanged in a split decision.
Brent climbed 1% to above $109 a barrel, extending gains into a seventh day and boosting prices to the highest level in three weeks. The White House said US officials were discussing Iran’s latest proposal but maintained “red lines” on any deal to end the eight-week war.
The yen strengthened 0.3% to around 159 per dollar and Japanese government bonds fluctuated after BOJ policymakers voted 6-3 to keep policy on hold. The decision pushed the odds of a rate hike in June to more than 70%, with traders awaiting Governor Kazuo Ueda’s press conference at 3:30 p.m. in Tokyo.
Higher oil prices and key risk events coming up later this week curbed enthusiasm for stocks. The MSCI Asia Pacific Index was little changed Tuesday, hovering around levels seen when the US-Israel war on Iran started in late February. Technology shares did better than the broader market with South Korean stocks jumping 1% and eclipsing the UK to become the world’s eighth-biggest stock market.
With the Federal Reserve due to announce its policy decision Wednesday amid geopolitical uncertainties, investors are turning their focus to earnings from tech giants to test whether the recent rally in stocks can be sustained. Global equities have erased their war-driven losses — even as crude oil prices remain elevated — in part due to the return of the AI trade.
“The recent rally in Asia tech, despite ongoing supply chain disruption, suggests investors are increasingly looking through near-term geopolitical risks,” said Gary Tan, a fund manager at Allspring Global Investments. “But a sustained re-rating versus the US will likely hinge on capex signals from hyperscalers in this week’s earnings reports.”
Elsewhere, futures contracts for the S&P 500 Index edged up 0.1% with the underlying gauge staying on track for its strongest monthly performance since 2020. European shares were also set for a modest gain at the open.
“Markets have recovered to new all-time highs while seemingly ignoring continued geopolitical risks that abound, and this has been done largely on the back of positive earnings revisions and expectations,” said Walter Todd, president and chief investment officer at Greenwood Capital Associates.
“Any cracks that emerge in this outlook as the largest companies report in coming weeks pose a significant risk to market momentum,” he said.
Alphabet Inc., Microsoft Corp., Amazon.com Inc. and Meta Platforms Inc. report on Wednesday, followed by Apple Inc. a day later. Asian companies are also heading into the busiest week of the current earnings season, offering investors an early glimpse of how the Iran war has affected results.
Also this week, along with the BOJ and the Fed, the European Central Bank and peers in the UK and Canada are all set to decide on interest rates, together deciding monetary policy for about half of the world’s economy.
While investors expect them to leave rates unchanged, markets will be on alert for signs officials, including Fed Chair Jerome Powell and ECB President Christine Lagarde, are worried about the inflation threat posed by the disruption to oil supply stemming from the war.
“The tone of the press conference will emphasize the prudence of the ongoing wait-and-see stance, although we suspect that investors are nearing the point at which one might expect the Fed to have a stronger conviction take on the fallout from the energy shock – even if that is unlikely to be communicated in its entirety,” said Ian Lyngen at BMO Capital Markets.
Corporate Highlights:
Contemporary Amperex Technology Co. Ltd. priced its Hong Kong share placement at the bottom of a marketed range, according to terms of the deal seen by Bloomberg News. Microsoft Corp. and OpenAI have agreed to drop the software giant’s exclusive right to sell the startup’s AI models, opening the door for the ChatGPT maker to pursue deals with cloud-computing rivals like Amazon.com Inc. Elliott Investment Management has built a stake in logistics company Nippon Express Holdings Inc., as the activist fund ramps up its investment activity in Japan. Some of the main moves in markets:
Stocks
S&P 500 futures were little changed as of 1:49 p.m. Tokyo time Nikkei 225 futures (OSE) fell 0.4% Japan’s Topix rose 0.9% Australia’s S&P/ASX 200 fell 0.6% Hong Kong’s Hang Seng fell 0.7% The Shanghai Composite was little changed Euro Stoxx 50 futures rose 0.4% Currencies
The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1715 The Japanese yen rose 0.3% to 158.99 per dollar The offshore yuan was little changed at 6.8291 per dollar Cryptocurrencies
Bitcoin was little changed at $76,937.48 Ether was little changed at $2,290.84 Bonds
The yield on 10-year Treasuries was little changed at 4.35% Japan’s 10-year yield was unchanged at 2.465% Australia’s 10-year yield advanced five basis points to 5.03% Commodities
West Texas Intermediate crude rose 1% to $97.37 a barrel Spot gold fell 0.3% to $4,667.79 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Toby Alder and Winnie Hsu.
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