US stock futures edged higher after several tankers managed to traverse the Strait of Hormuz on the weekend, raising hopes that the key oil transport artery could reopen.
Contracts for the S&P 500 Index rose 0.3 per cent — pointing to the first gain in five days for the underlying gauge — as President Donald Trump raised pressure on nations to help reopen the key oil route and said the US was talking to Iran. The futures retreated from session highs, however, suggesting sentiment remains shaky. Europe’s Stoxx 600 Index dipped 0.4 per cent.
Treasury 10-year yields slipped two basis points, after rising for five straight sessions, while the dollar fell from three-month highs touched last week.
High oil prices are keeping alive worries about inflation and economic growth.
READ MORE
“Every day that goes by with the Hormuz Strait closed is another bad news for the global economy,” said Francois Rimeu, senior strategist at Credit Mutuel Asset Management. “If the crisis continues there will be at some point some kind of trigger that will make investors realize the scale of the supply shock that’s building up.”
Interest-rate guidance should come this week from central banks including the Federal Reserve, European Central Bank, Bank of Japan and the Bank of England. Their meetings will be crucial to gauge policymakers’ thinking on the economy and the prospect for interest rates.
As Wall Street has dialed back its bets on rate cuts for this year, while bonds from the US to Japan and Australia have dropped. A gauge of global debt has also ceded its year-to-date gains. Gold has fallen below $5,000 as high oil prices threaten Fed rate cuts.
Still, analysts at Goldman Sachs Group Inc. expect Treasuries and most other government bond to edge higher by year-end, seeing growth risks outweighing the inflation pulse.
Japan’s Nikkei share average closed in the red on Monday for a third consecutive day, as the Middle East crisis raised concerns about longer-term economic damage from higher energy prices and a weaker yen.
The benchmark Nikkei 225 Index edged 0.1 per cent lower to close at 53,751.15, after earlier falling as much as 1.3 per cent. The broader Topix slid 0.5 per cent to 3,610.73.
The Nikkei has lost almost 9 per cent since the start of US and Israeli air strikes on Iran more than two weeks ago, as the conflict spread into neighbouring countries and paralysed shipment of petroleum through the Strait of Hormuz.
Shares briefly turned up after US president Donald Trump said he is urging other countries to help safeguard shipping routes.
Japan does not currently plan to dispatch naval vessels to escort ships in the Middle East, prime minister Sanae Takaichi said. Meanwhile, finance minister Satsuki Katayama said the government is prepared to take decisive steps in financial markets, as the yen sank close to the psychologically important 160-per-dollar line.
The market seems to be growing increasingly concerned about stagflation, where economies are gripped by simultaneous increases in inflation and declines in growth, said Maki Sawada, an equities strategist at Nomura Securities.
“Concerns about an economic slowdown due to rising oil prices are being factored in,” Sawada said. “Rather than a general selloff today, we are seeing a trend where these domestic demand sectors are performing firmly and underpinning the Japanese stock market.”
There were 65 advancers on the Nikkei index against 154 decliners. The largest gainers in the index were Ibiden, up 3.8 per cent, followed by Screen Holdings, which advanced 3.7 per cent.
The largest losers were utility Tokyo Electric Power , down 4.8 per cent, followed by Isuzu Motors, which fell 4.4 per cent. - Reuters, Bloomberg
