Oil Gains as Iran Deal Eludes, Asian Stocks Rise: Markets Wrap
(Bloomberg) — Oil extended its gains in early Monday trading as Iran rejected talks with the US and a deal to reopen the vital Strait of Hormuz remained elusive.
Global benchmark Brent crude rose 0.8% to trade above $84 a barrel after rising more than 5% over the previous three sessions. The dollar, the haven of choice during the Middle East conflict, was steady against most of its Group-of-10 peers.
Early attention in Asia is also on the yen, which traded slightly weaker at around 157.90 per US dollar. The Japanese currency strengthened sharply on Friday after labor data was released.
Asian stocks rose on Monday after soft US jobs data sent Wall Street gauges higher on Friday, with the S&P 500 Index closing at a record high.
Iran and Oman failed to reach a final deal to reopen the Strait of Hormuz over the weekend after Tehran renewed a long list of demands to Washington, suggesting any near-term relief for oil and gas supplies may be limited. US consumer price data due this week will also be in focus after Friday’s soft jobs report reinforced expectations the Federal Reserve won’t need to raise interest rates soon.
“A much weaker than expected non-farm payrolls release painted a grim picture of the US labor market,” Kyle Rodda, a senior analyst at Capital.com, wrote in a note to clients. “But market participants treated the data as a ‘bad news is good news’ situation.”
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 chance 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.
Asian currencies may also gain after US bond yields fell and the dollar slid to a two-month low. Treasuries rallied on Friday, with two-year yields, the most sensitive to Fed policy expectations, dropping 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.
There’s “a positive backdrop for Asia-Pacific with a softer US dollar, lower crude oil prices and the broad recovery of equity sentiment,” Wee Khoon Chong, a strategist at BNY in Hong Kong, wrote in a note to clients.
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. 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 fell 0.2% as of 9:03 a.m. Tokyo time Hang Seng futures rose 0.5% Japan’s Topix fell 0.2% Australia’s S&P/ASX 200 fell 0.2% Euro Stoxx 50 futures rose 0.3% Currencies
The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1558 The Japanese yen was little changed at 157.86 per dollar The offshore yuan was little changed at 6.7425 per dollar The Australian dollar was little changed at $0.7065 Cryptocurrencies
Bitcoin fell 0.4% to $64,853 Ether fell 0.5% to $1,909.94 Bonds
The yield on 10-year Treasuries advanced one basis point to 4.66% Australia’s 10-year yield declined two basis points to 4.99% Commodities
West Texas Intermediate crude rose 0.6% to $78.67 a barrel Spot gold was little changed This story was produced with the assistance of Bloomberg Automation.
–With assistance from Matthew Burgess.
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