Asian Shares Edge Up as Dollar Weakens; Oil Prices Climb Amid Middle East Tensions
Asian shares made modest gains on Monday, bolstered by a weaker dollar and declining bond yields as investors anticipate potential rate cuts in the U.S. and Europe. Meanwhile, oil prices rose 0.8% due to escalating tensions between Israel and Hezbollah, which raised concerns about possible supply disruptions if the conflict intensifies.
Brent crude increased by 55 cents to $79.57 per barrel, and U.S. crude rose 56 cents to $75.39 per barrel. The situation in the Middle East has added a layer of uncertainty to the market, influencing oil prices as traders monitor the unfolding events.
On the corporate front, all eyes are on Nvidia (NVDA.O), with the tech giant set to release its earnings report on Wednesday. Nvidia’s stock has surged approximately 150% year-to-date, contributing significantly to the S&P 500’s 17% gain this year. Analysts are keenly watching whether Nvidia will meet or exceed market expectations, with some predicting that a revenue figure of $30 billion or more could spark a “sell the news” reaction if it falls short of anticipated targets.
U.S. stock futures showed little movement after a slight decline earlier. S&P 500 and Nasdaq futures were steady, while EUROSTOXX 50 futures dropped 0.2%. The FTSE futures market was closed for a holiday. MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) advanced 0.8%, building on a 1.1% rise last week. South Korean (.KS11) and Chinese blue-chip (.CSI300) stocks were relatively unchanged. In contrast, Japan’s Nikkei (.N225) fell 1.0% due to a stronger yen impacting exporter stocks.
The yen strengthened against the dollar, trading at 143.64 yen, following Federal Reserve Chair Jerome Powell’s remarks suggesting a shift towards monetary easing. Powell’s speech, which lacked the usual caveats about gradual policy adjustments, has led markets to speculate on potential rate cuts, with significant focus on the upcoming jobs report on September 6. Powell’s comments have increased expectations for a “soft landing” for the U.S. economy.
Data on U.S. personal consumption and core inflation is expected on Friday, alongside a preliminary reading on European Union inflation. Analysts predict these reports will be favorable, paving the way for rate cuts. Fed fund futures are already pricing in a quarter-point cut at the September 18 meeting, with a 38% chance of a more substantial 50-basis-point reduction. Goldman Sachs forecasts a series of rate cuts through the end of the year, contingent on the strength of August’s employment report.
The European Central Bank is also expected to implement a quarter-point cut next month, with further easing anticipated by the end of 2025. Two-year Treasury yields stood at 3.91%, down nearly 10 basis points from Friday, while 10-year yields held steady at 3.79%.
The dollar’s weakness contributed to gold’s support, with prices hovering around $2,514 an ounce, just shy of the all-time peak of $2,531.60. The euro was up at $1.1191, approaching a 13-month high, and the Swiss franc remained firm at 0.8461 per dollar.