Asian Stocks Advance, Oil Extends Drop on Iran: Markets Wrap

(Bloomberg) — Asian stocks tracked Wall Street higher after optimism over a possible interim deal between Washington and Tehran eased concerns about energy supplies. Oil extended its losses.

MSCI’s Asia Pacific equities gauge climbed 1.1%, led by a 3.5% jump in South Korean shares. Samsung Electronics Co. and SK Hynix Inc. both rallied more than 4% in Seoul after a US semiconductor gauge posted its strongest four-day rally since 2020, as investors renewed bets on the artificial intelligence trade. Australian shares hit an all-time high.

Futures contracts for the S&P 500 Index edged higher in early Asian trading after the benchmark closed at a record high on Tuesday. Caution lingered, however, as SpaceX shares fell 7% in extended trading after the company projected higher-than-expected spending on its AI business. Advanced Micro Devices Inc. also slid 9% after an underwhelming outlook.

Elsewhere, Brent extended its losses to near $79 a barrel as prospects for an interim deal centered on reopening the Strait of Hormuz appeared to gain momentum. Treasuries held their gains from the previous session as traders curbed expectations for interest-rate hikes, while the yen’s gains, fueled by the joint US-Japan intervention, stalled.

Investors will now be watching whether progress toward reopening the key shipping route extends the recent decline in oil prices, easing inflation pressures and reducing expectations for Federal Reserve rate hikes. They will also be assessing whether the AI trade can regain momentum after a month of volatility erased gains at several hedge funds.

“Markets are reacting to the possibility that a reopening of the Strait of Hormuz could help normalize global oil supplies and reduce near-term energy price pressures,” said Tony Miano at Wells Fargo Investment Institute. “Lower oil prices can ease inflation concerns.”

In other corners of the market, Treasuries rallied in the New York session as signs of progress toward a diplomatic resolution of the Iran war sent oil prices lower, curbing expectations for more than one Fed interest-rate hike in the coming year.

The yield on the benchmark 10-year Treasury held at 4.61% early Wednesday, while a Bloomberg gauge of the dollar edged lower. Gold rose to about $4,080 an ounce as the decline in oil prices reduced expectations that rates will stay higher for longer.

Elsewhere, Asia-based hedge funds logged extensive losses in July, as the tech selloff led to what Goldman Sachs Group Inc. prime brokers said was the worst month for regional stockpickers on record.

Back to geopolitical news, a short-term deal may help normalize commercial shipping in the strait — a crucial conduit for global energy supplies — and prevent the resumption of fighting in the Middle East.

But even if such an agreement is reached, it might still fail to end the war conclusively or resolve Trump’s concerns about Iran’s nuclear program.

Qatar said a proposal had been drafted, while US and Iranian officials expressed optimism about an agreement to reopen the crucial waterway, impacting oil prices.

“With so much optimism now priced into the oil market — and the risk of a repeat of last week’s false dawn still very real — the balance of risks appears to be becoming more skewed back to the upside,” wrote Tony Sycamore, an analyst at IG Markets in Sydney.

Corporate Highlights:

SpaceX fleshed out its plans to compete directly with the largest mobile phone carriers in the US by complementing its satellite-based internet service with land-based infrastructure. The Federal Communications Commission is drafting a ban on imports of some Chinese data center components to protect US data center infrastructure, Reuters reported. Chipotle Mexican Grill Inc. removed jalapeños from multiple stores in Minnesota after learning the peppers may be linked to a salmonella outbreak in the state that’s sickened 110 people. India expanded the size of its share sale in Life Insurance Corp. to raise $3.3 billion after the base offer was oversubscribed. Some of the main moves in markets:

Stocks

S&P 500 futures rose 0.2% as of 9:52 a.m. Tokyo time Hang Seng futures rose 0.3% Japan’s Topix rose 1.5% Australia’s S&P/ASX 200 rose 0.2% Euro Stoxx 50 futures rose 0.4% Currencies

The Bloomberg Dollar Spot Index was little changed The euro was unchanged at $1.1531 The Japanese yen was little changed at 157.63 per dollar The offshore yuan was little changed at 6.7483 per dollar The Australian dollar was little changed at $0.7045 Cryptocurrencies

Bitcoin fell 0.5% to $63,969.26 Ether fell 0.6% to $1,863.82 Bonds

The yield on 10-year Treasuries was little changed at 4.62% Japan’s 10-year yield declined three basis points to 2.825% Australia’s 10-year yield declined five basis points to 4.92% Commodities

West Texas Intermediate crude fell 0.4% to $75.43 a barrel Spot gold rose 0.1% to $4,082.61 an ounce This story was produced with the assistance of Bloomberg Automation.

–With assistance from Toby Alder.

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