Shares edge higher in Asia as oil dips, earnings loom
Asian stock markets are mostly stronger, with Wall Street futures starting the week with gains on hopes of an optimistic earnings season, while easing oil prices promise relief from inflationary pressures.
While there was no new development in the tense peace talks between the USA and Iran, it was reported that 160 ships passed through the Strait of Hormuz from Monday to Saturday last week.
OPEC+ also agreed to increase production targets by a further 188,000 barrels per day starting in August, on top of similar increases in June and July. As a result, Brent fell 0.6 per cent to four-month lows at US$71.70 (A$A103.41) a barrel, and US crude lost 0.5 per cent to US$68.38 (A$A98.63).
The decline in energy costs, combined with a softening US jobs report, has reduced the risk of the Fed raising interest rates in the near term; futures indicate a 78 percent chance of a stable outcome at the July 29 meeting.
Minutes of the Fed’s last meeting will be released on Wednesday, and although it occurred before the latest drop in oil, it should color the hawkish tone of some board members.
“Even if you consider the risk that the Fed could act soon, I think we’re safe for at least another month,” said ANZ head of research Richard Yetsenga.
“Our overall view is that the Fed will do nothing, but clearly we have been above target for five years at the Fed’s preferred inflation rate,” he added.
“There is a risk that the Fed will run out of patience.”
The reduced risk of rate hikes this month will allow investors to focus on the upcoming earnings season, when the artificial intelligence boom will deliver high-tech profits.
Only Delta Air Lines and PepsiCo are included as tastemakers this week, but Samsung Electronics will make a big jump on Tuesday as analysts expect an 18x increase in profits.
The world’s largest memory chip maker by sales is expected to show an operating profit of 86 trillion won ($56.35 billion ($81.28 billion)) in the April-June quarter, according to LSEG SmartEstimate.
South Korea’s hot market cooled slightly last week but was still up 92 percent for the year as AI demand and limited supply pushed chip prices up. The index rose another 2.25 percent on Monday, while Japan’s Nikkei index fell 0.1 percent.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.4 percent.
In Europe, EUROSTOXX 50 futures were flat, while DAX futures rose 0.2 percent and FTSE futures fell 0.2 percent. S&P 500 futures rose 0.5 percent, while Nasdaq futures climbed 1.4 percent, on top of last week’s 2.1 percent gain.
The data calendar kicks off with the US ISM Services survey later on Monday, where forecasts support a slight pullback to a still-healthy 54.0 in June.
A group of central bankers, including Fed Chairman Christopher Waller, will speak at the ECB conference later in the day, and ECB President Christine Lagarde will also speak in Paris.
New Zealand’s central bank will meet on Wednesday and markets are betting that the bank will raise its 2.25 percent interest rate by a quarter point, the first rate hike since mid-2023.
Policymakers have been heralding a tightening for some time, but again this was before the collapse in oil prices and there should be a chance of surprise by keeping rates steady.
In foreign exchange markets, the dollar index was steady at 100.880 after falling following the disappointing June payrolls report. The euro was steady at $1.1445, just above its 13-month low of $1.1325.
The dollar held at 161.45, not far from the yen’s 40-year high at 162.84, as speculators grew wary of Japanese intervention.
On commodity markets, gold was little moved at US$4,177 ($A6,025) an ounce after rising two per cent last week.
