Asia stocks start cautiously as oil climbs on doubts over US-Iran truce

Reports coming in for today mention that Share markets made a wary start on Monday as crude prices popped elevated again amid doubts the United States and Iran will reach a truce anytime soon, keeping bonds under pressure ahead of a week packed with economic news.

Over the weekend, US President Donald Trump rejected an Iranian proposal to reopen the Strait of Hormuz, claiming Tehran was desperate to make a deal. Trump stated talks would continue the current week, though Iran reveals no sign of watering down its proposals.

Brent futures quickly rose 1.6% to $106.00 a barrel, bringing upside so far this month to 17%, while US crude futures further noted 1.1% to $93.47 a barrel.

A dearth of refining capacity has in turn lifted diesel prices to all-time highs far above crude, raising the risk that inflation will become embedded in pricing and wage decisions.

Central banks have responded with a round of rate hikes, with the Reserve Bank of Australia likely to be the next to tighten when it meets on Tuesday.

Markets now imply a 66% chance the The US central bank will hike for a second straight meeting in October, with around 90 basis points of tightening priced out to late next year.

At the same time, a run of firm US economic data has supported expectations for corporate earnings even as bond yields surge, so underpinning equities.

The Atlanta Fed's GDPNow measure is forecasting expansion of a racy 5.0% for this quarter. Activity has additionally proven upbeat in Asia and Europe, thanks in part to the boom in AI investment.

"The global expansion appears to have entered a phase of broad-based resilience rarely noted during the past two decades," stated Bruce Kasman, chief economist at JPMorgan.

"Amidst firm expansion and firming perceptions of resilience to high energy prices, it is no surprise that rates are moving elevated while equity prices stay close to record marks," he further noted. "What is most notable around recent market moves is their extension of elevated policy rates well beyond the coming year."

BONDS FEAR ELEVATED FOR LONGER

Japan's Nikkei advanced 0.8%, while South Korean stocks dipped 0.6%. MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.2%.

In Europe, EUROSTOXX 50 futures firmed 0.4%, while DAX futures advanced 0.3% and FTSE futures further noted 0.2%. On Wall Street, S&P 500 futures declined 0.2%, while Nasdaq futures were flat.

Yields on 30-year Treasuries nudged up to 5.5185%, near their highest since 2004, having advanced 27 basis points just this month. Two-year yields have shot up 55 basis points this month in anticipation of Fed hikes.

Mark Cabana, a rate strategist at Bank of America, sees further room for bonds to sell off as markets price elevated Fed Funds.

"The repricing may not stop until there's clear evidence that financial conditions have become sufficiently restrictive," he warned.

The spike in yields raises borrowing costs globally just as tech firms are borrowing billions to fund their AI expansion, while additionally lifting the discount applied to firm earnings.

The US data calendar is packed with readings on inflation, GDP, manufacturing and jobs. The key September payrolls report on Friday is forecast to show a gain of 85,000 while the unemployment rate is anticipated to hold at 4.1%, with some chance of a dip to 4.0%.

The recent spate of upbeat figures has boosted the dollar index to two-month peaks at 101.39. The euro was down at $1.1380, having lost 2.0% so far this month.

The dollar edged up to 157.53 yen, after dipping on Friday when Japan's Finance Minister Satsuki Katayama stated Trump had voiced concerns around yen softness.

Sterling was just above three-month lows at $1.3228, having been helped somewhat by hawkish comments on rates from Bank of England Governor Andrew Bailey.

In commodity markets, non-interest-bearing gold was off 0.5% at $4,262 an ounce, having fallen more than 4% this month as yields shot elevated. [GOL/]