Global Stock Rally Extends, Oil Advances on Iran: Markets Wrap
(Bloomberg) — Global stocks traded near a record high as Asian shares tracked Wall Street higher after soft US jobs data eased expectations for a Federal Reserve interest-rate hike. Oil extended gains as Iran rejected talks with the US and a deal to reopen the Strait of Hormuz remained elusive.
The MSCI All Country World Index, the broadest gauge of global equities, rose 0.1%, its seventh advance in the past eight sessions. MSCI’s Asian gauge gained 0.4%, tracking a Wall Street rally on Friday that sent the S&P 500 Index to an all-time high. Futures contracts indicated modest gains for US gauges, while Europe was set for a flat start to the week.
Elsewhere, Brent crude rose 0.5% to around $84 a barrel, extending a rally of more than 5% over the previous three sessions. As oil advanced, Treasuries gave back some of Friday’s gains, pushing the 10-year yield up one basis point to 4.66%. The dollar strengthened against most of its Group-of-10 peers.
Monday’s gains followed weeks of volatility as investors questioned whether elevated valuations and billions of dollars in AI spending would generate adequate returns. Focus now shifts to US consumer price data due this week after Friday’s jobs report eased concerns the Federal Reserve may need to raise interest rates soon.
“The jobs data helped ease concerns about a rise in interest rates,” said Kohei Onishi, a senior investment strategist at Mitsubishi UFJ Morgan Stanley. “That’s prompting investors to rebuild positions in technology stocks.”
Employers unexpectedly cut jobs in July and hiring in the prior two months was revised lower, suggesting the labor market is weaker than previously thought.
Traders trimmed the likelihood of a rate hike at the Fed’s September meeting to a roughly 43% chance, down from 64% a week ago, according to swaps data compiled by Bloomberg.
Treasuries surrendered some of their gains caused by the jobs data. On Friday, two-year yields, the most sensitive to Fed policy expectations, dropped as much as nine basis points after the jobs report before ending about five basis points lower at 4.19%. That marked their biggest weekly decline since May.
The yield on the two-year note rose one basis point to 4.20% on Monday.
In other corners of the market, gold traded steady at about $4,340 an ounce after a 7.3% advance last week. It was the best weekly gain for the metal since January.
Attention in Asia was also on the yen, which traded weaker at around 158.30 per dollar. The yen has underperformed all its Group-of-10 peers this month as the boost from recent intervention fades, putting traders on alert for further official action. The Japanese currency strengthened sharply on Friday after labor data was released.
What Bloomberg Strategists Say…
“Oil is firmer on Monday after another weekend of stalled progress on reopening the Strait of Hormuz, yet traders are skeptical prices will rise for an extended period. Net long oil positioning showed only a tepid rebound in July, but that’s already being trimmed across crude contracts.”
— Mark Cranfield, MLIV. For full analysis, click here.
Back to geopolitics, President Donald Trump on Sunday signaled patience, in an interview with Axios, saying the US could wait for Tehran’s economic suffering to soften its stance. The comments followed weeks of Trump threatening massive airstrikes on Iran only to pull back, saying he wanted to give negotiations a chance.
Investors can’t be too bearish given Trump is likely to back away from his threats again, particularly as his approval ratings have fallen to fresh lows, My Bui, an economist at AMP Ltd., wrote in a note to clients.
“So for now, it remains business as usual, with shares still supported by solid fundamentals, strong economic growth and rising productivity,” she added.
Corporate News:
Berkshire Hathaway Inc. spent about $4.5 billion to buy back its own shares in the second quarter and purchased nearly $20 billion of equities in the period, signs that Chief Executive Officer Greg Abel is putting more of the firm’s cash pile to work. Sony Group Corp. and TSMC are in talks to spend a combined ¥1 trillion ($6.4 billion) on their planned joint factory in Japan, according to a person familiar with the plans. SK Hynix Inc. is considering options for its Chongqing, China-based facility, including bringing in an investor to help accelerate growth, according to people with knowledge of the matter. Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.1% as of 2 p.m. Tokyo time Japan’s Topix rose 0.6% Australia’s S&P/ASX 200 fell 0.3% Hong Kong’s Hang Seng rose 0.6% The Shanghai Composite rose 0.2% Euro Stoxx 50 futures were little changed Currencies
The Bloomberg Dollar Spot Index rose 0.2% The euro was little changed at $1.1551 The Japanese yen fell 0.4% to 158.34 per dollar The offshore yuan was little changed at 6.7457 per dollar The Australian dollar was little changed at $0.7060 Cryptocurrencies
Bitcoin fell 0.2% to $64,979.66 Ether fell 0.3% to $1,914.7 Bonds
The yield on 10-year Treasuries was little changed at 4.65% Japan’s 10-year yield advanced two basis points to 2.805% Australia’s 10-year yield declined one basis point to 5.00% Commodities
West Texas Intermediate crude rose 0.3% to $78.44 a barrel Spot gold was little changed This story was produced with the assistance of Bloomberg Automation.
–With assistance from Matthew Burgess and Momoka Yokoyama.
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