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 fell and bonds gained.

Gauges in Japan and South Korea advanced, while Australia’s equity benchmark index hit an intraday record, sending the broader MSCI Asia Pacific Index 1% higher.

Earlier, the S&P 500 Index climbed 1.8% to a record close and the Nasdaq 100 surged 3.3%. A gauge of chipmakers saw its best four-day rally since 2020. SpaceX shares dropped 7% in extended trading on higher-than-expected spending on its artificial intelligence business. Advanced Micro Devices Inc. fell 9% as its outlook failed to excite investors.

Elsewhere, US crude extended its losses as prospects for an interim deal centered on reopening the Strait of Hormuz appeared to gain momentum. West Texas Intermediate fell 1% to about $75 a barrel. Treasuries were little changed in Asia after rising on Tuesday 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.”

Qatar said a proposal had been drafted and both American and Iranian officials sounded hopeful about an agreement to reopen the crucial waterway.

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.

Meanwhile, 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.

Yields fell across maturities by four to six basis points on Tuesday, with the yield on the two-year note reaching the lowest level since July 20 and the benchmark 10-year at 4.61%. A Bloomberg gauge of the dollar edged lower.

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.

On the economic front, US job openings eased in June, but hiring picked up slightly, indicating relatively steady demand for workers heading into the summer.

That stability gives the Fed room to stay focused on inflation, although Friday’s jobs report could quickly change the conversation, according to Bret Kenwell at eToro.

“A red-hot print could strengthen the case for a September rate hike, particularly with inflation still elevated,” he said. “However, a disappointing report combined with last week’s weaker-than-expected gross domestic product growth could give the Fed more cover to remain on hold.”

Corporate Highlights:

The Federal Communications Commission is drafting a ban on imports of some Chinese data center components to protect US data center infrastructure, Reuters reported. Jefferies Financial Group Inc. has been told that some of the invoices underpinning its financing to an iron ore trader called Sapphire Minmetals Corp. are not genuine, according to people familiar with the matter. 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 9:04 a.m. Tokyo time Hang Seng futures rose 0.3% Japan’s Topix rose 0.9% Australia’s S&P/ASX 200 rose 0.6% Euro Stoxx 50 futures rose 0.9% Currencies

The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1533 The Japanese yen was unchanged at 157.75 per dollar The offshore yuan was little changed at 6.7476 per dollar The Australian dollar was unchanged at $0.7046 Cryptocurrencies

Bitcoin fell 0.4% to $64,031.26 Ether fell 0.4% to $1,867.91 Bonds

The yield on 10-year Treasuries was little changed at 4.61% Japan’s 10-year yield declined 2.5 basis points to 2.830% Australia’s 10-year yield declined five basis points to 4.92% Commodities

West Texas Intermediate crude fell 0.9% to $75.06 a barrel Spot gold fell 0.1% to $4,073.20 an ounce This story was produced with the assistance of Bloomberg Automation.

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