Oil eyes weekly drop on Hormuz deal hopes
World stock markets were at record highs on Friday, with oil futures tracking for their steepest weekly decline in nearly two months as traders awaited details on a possible deal to reopen the Strait of Hormuz and extend the US-Iran ceasefire.
Sources told Reuters that the United States and Iran have agreed to extend the ceasefire and lift restrictions on shipping, but US President Donald Trump has not yet confirmed this and Iranian state media has said it has not yet been completed.
Movements were modest on the Asian morning; S&P 500 futures were flat after the index hit record highs overnight. Brent crude futures fell nearly 50 cents a barrel to US$93.17 ($A130.36), a weekly drop of more than 10 per cent.
The dollar headed for a small decline for the week following the decline in US bond yields. But analysts are unsure whether this period will be extended because the US-Iran deal is unlikely to quickly address the inflationary impulse unleashed by rising fuel prices.
“The market is already taking the view that a deal will be done and the strait will be opened,” said Jason Wong, senior market strategist at BNZ in Wellington.
“The point is that this removes the tail risk that could lead to a really bad outcome. I don’t think pulling oil down $US20 ($A28) or Treasuries down 20 points is a green light.”
MSCI’s world equity index rose to a record high as AI enthusiasm boosted chipmaker shares globally and benchmarks in Tokyo and Seoul rose nearly 2.0 percent on Friday morning, heading for weekly gains.
Dell was also joining the wave, its shares soaring 39 percent after hours as data center demand boosted sales of its AI-optimized servers, raising revenue and profit expectations.
“The question now is whether this can continue. We believe we are still in the middle of a longer AI-focused investment cycle,” said Damian McIntyre, head of multi-asset solutions at asset manager Federated Hermes.
“We revised our S&P 500 target to 8,000 this year and 9,000 next year.”
The S&P 500 closed at a record high of 7,563.63 on Thursday.
In fixed income, US Treasury bond yields remained stable on the Asian day, while 10-year yields fell by about 14 basis points on the week to 4.45 percent. Global bond yields also fell this week.
Preliminary inflation figures will be released later in the day, along with Canadian GDP across Europe. Overnight data showed US personal consumption expenditures, income, home sales and GDP were on the weaker side of expectations, and inflation was warm but slightly below forecasts.
Friday’s data showed that annual core inflation in Tokyo remained below Japan’s 2.0 percent target for a fourth consecutive month in May, but the recovery in national factory activity remained resilient, supporting the argument for a rate hike in June.
In foreign exchange markets, the yen has been under pressure and in the spotlight after falling to levels that prompted reported Japanese intervention in late April and early May.
It was trading at 159.26 against the dollar, slightly stronger than the line around 160 defended by officials.
Nomura said Japan’s finance ministry plans to publish the amount of dollar sales it made, and estimates put it at about 8.6 trillion yen ($76 billion).
The euro remained steady at US$1.1655 ($A1.6307). The New Zealand dollar has made a significant move this week, up 1.8 percent against the dollar, after the Reserve Bank of New Zealand kept interest rates steady on Wednesday but offered a more hawkish outlook than expected.
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