Asian markets tread cautiously as oil prices retreat and central banks convene
Stocks in Asia opened lower on Monday while Brent crude fell from six-month highs, and investors awaited a series of central-bank meetings and corporate earnings that could test confidence in the AI-driven market rally.
Asian equity markets opened with modest declines on Monday as Brent crude slipped 1.9% to $114.48 per barrel, easing from a six-month peak after reports that Qatari mediators were in Tehran to help de-escalate regional tensions. The price drop followed a 6.2% weekly gain that had been driven by Houthi attacks on Saudi energy infrastructure.
The Houthi group said it had struck Saudi Arabia’s East-West crude-pumping stations and Riyadh airport, though Saudi officials have not confirmed the attacks. Analysts noted that higher oil prices could pressure central banks that are meeting this week, with many expected to keep rates steady for now but likely to resume hikes later.
"The main message from global central banks grappling with this year's macroeconomic surprises is that a relatively shallow rate-hike cycle is underway," said Bruce Kasman, global head of economics at JPMorgan.
"G3 central banks are likely to remain on hold, but Canada should start its tightening cycle and first moves are expected from the UK and Sweden next month," Kasman added.
New Zealand’s Reserve Bank is widely expected to raise rates on Wednesday, while markets price an 80% probability that the U.S. Federal Reserve will hold rates at its October meeting and raise them in December. A key U.S. core-inflation reading is due, with expectations of a 3.1% year-over-year increase for September.
"The Fed is set to skip raising rates at its October meeting but is likely to deliver a second hike in December," analysts at Goldman Sachs wrote.
"The most important risk is that oil futures are above our forecasts, largely reflecting concerns about potential further conflict with Iran," the analysts added, noting that a prolonged energy shock could broaden inflationary pressures.
In the United States, S&P 500 futures rose 0.2% and Nasdaq futures 0.1%, while European futures for the EUROSTOXX 50, DAX and FTSE all posted gains of around 0.3-0.4%. Analysts project strong earnings for major tech firms, with consensus forecasts of $90.6 billion in revenue for Microsoft, $202 billion for Amazon and $128 billion for Alphabet.
Bond yields eased, with the 10-year U.S. Treasury rate at 4.97%, down from a recent peak of 5.36%. In currency markets, the Japanese yen held at 156.90 per dollar, the euro rose to $1.1220, and sterling remained at $1.3346 as Britain’s new finance minister, John Healey, prepares his first budget.
Gold prices firmed 0.4% to $4,012 an ounce after a recent decline. The Brazilian real was not quoted in Asian trading, following President Luiz Inácio Lula da Silva’s election to a fourth term and subsequent political disputes.
Reporting by Wayne Cole; Editing by Chris Reese and Thomas Derpinghaus