Asian stocks rose on Monday, following Wall Street higher after weaker-than-expected U.S. jobs data reduced expectations of an immediate rise in borrowing costs. However, oil prices edged higher as uncertainty over efforts to reopen the Strait of Hormuz kept investors focused on the risks to global energy supplies.
Iran said on Sunday that negotiations with Oman over new shipping lanes through the Strait of Hormuz were nearing completion. Tehran, however, reiterated that the vital waterway would not fully reopen until the United States met additional conditions.
Brent crude rose 0.6% to $84.04 a barrel, while U.S. crude gained 0.5% to $78.56. Shipping through the strategic waterway remained severely restricted.
The rise in fuel prices comes ahead of the U.S. consumer price report due on Wednesday, which could provide important clues about the Federal Reserve’s next interest-rate decision.
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Economists expect headline consumer inflation to rise 0.1% in July and core inflation to increase 0.2%. A stronger-than-expected reading could revive expectations of a Federal Reserve rate hike as early as September.
“Our forecast for core CPI of 0.22% is probably not quite firm enough to prompt a hike from the Fed at the September meeting, though repeated prints closer to 0.3% could do it,” said Michael Feroli, chief U.S. economist at JPMorgan.
Investors are also watching whether core goods prices rebound after declining for two consecutive months.
Rate Expectations Support Asian Markets
Markets have sharply reduced expectations of a September Federal Reserve rate increase. Futures now imply roughly a 45% probability of a September move, down from 67% a week earlier.
The reduced rate risk helped U.S. Treasury bonds rally on Friday and pushed Wall Street’s major indexes to record highs.
Asian markets followed the gains. Japan’s Nikkei rose 2%, while South Korea’s benchmark gained 0.8%. MSCI’s broadest index of Asia-Pacific shares outside Japan advanced 0.7%.
Chinese blue-chip stocks moved in the opposite direction, falling 0.7% after data showed consumer and producer prices remained weaker than expected in July, highlighting continued weakness in domestic demand.
Strong Earnings Support U.S. Stocks
U.S. equities continue to receive support from strong corporate earnings, particularly among technology and artificial intelligence companies.
S&P 500 futures rose 0.1%, while Nasdaq futures gained 0.3%, following a roughly 5% rise in the Nasdaq last week.
With almost 90% of S&P 500 companies having reported their results, earnings per share were up around 30% from a year earlier when investment gains at Alphabet and Amazon were excluded. The proportion of companies beating earnings expectations stood at 76%, matching the strongest level since 2021, according to Bank of America analysts.
Artificial intelligence remains a major driver of corporate earnings. Median EPS growth among AI-related companies stood at 28%, compared with 12% for companies less exposed to AI.
However, analysts expect AI-related earnings growth to slow to around 16% next quarter, suggesting investors may become increasingly demanding about the returns generated by the massive investments being made in the sector.
JPMorgan analysts raised their 2026 S&P 500 earnings forecast to $365 per share, representing annual growth of 35%. They also increased their year-end S&P 500 target to 8,000 from 7,800.
This week’s earnings calendar is lighter but includes major companies such as semiconductor manufacturer Applied Materials, networking equipment maker Cisco and cloud infrastructure company CoreWeave.
Dollar Weakens as Rate Expectations Shift
The broader improvement in risk sentiment and falling bond yields pushed the U.S. dollar lower.
The euro remained close to a seven-week high at $1.1553, while the dollar gained 0.3% against the Japanese yen to 158.35.
Japanese officials remain concerned about the yen’s weakness and the possibility of further intervention in currency markets.
Bank of Japan policymakers have also warned of increasing inflation risks that could require faster-than-expected interest-rate increases. Minutes from the central bank’s July meeting strengthened expectations that Japan could raise rates in September.
In bond markets, the yield on the 10-year U.S. Treasury note was little changed at 4.662%, with investors preparing for $125 billion in new U.S. government debt issuance this week.
Gold Holds Near Record Levels
Gold remained around $4,333 an ounce after gaining more than 7% last week.
Lower bond yields have supported the precious metal because gold does not generate interest income and therefore becomes relatively more attractive when borrowing costs and yields decline.
At the same time, continued uncertainty surrounding the Gulf, monetary policy and global trade is supporting demand for safe-haven assets.
The market is currently balancing two competing forces. On one side, weaker U.S. employment data has reduced expectations of higher interest rates and encouraged investors to buy equities. Strong corporate earnings, particularly from AI-related companies, are adding further momentum.
On the other, the unresolved situation around the Strait of Hormuz continues to threaten global energy supplies. Any prolonged disruption could push oil prices higher and create renewed inflationary pressure, potentially complicating the Federal Reserve’s plans to ease monetary policy.
For now, investors appear more focused on lower rate expectations and strong earnings than on the Gulf risks. But Wednesday’s U.S. inflation report could determine whether that optimism continues, particularly if higher oil prices begin feeding into broader inflation.
With information from Reuters.
