Stocks Gain in Asia, Oil Flat Amid New Gulf Proposals
SYDNEY, May 4 (Reuters) – Asian markets saw shares edge higher on Monday, with oil prices remaining stable, as investors found some reassurance in signs of tentative progress towards resolving the Middle East conflict. This comes at the start of a busy week featuring numerous corporate earnings reports and crucial economic data releases.
Currency Movements and Intervention Watch
The Japanese yen experienced a sudden surge in Asian trading, causing the dollar to fall by as much as 0.9% to 155.7 yen before recovering some ground. Traders are maintaining a high alert for potential further intervention by Tokyo, following last week’s move to bolster the currency.
Middle East Tensions and Shipping Lanes
U.S. President Donald Trump announced that the U.S. would initiate efforts on Monday morning to free up ships reportedly stranded in the Strait of Hormuz, though specific details of the plan were not disclosed. A statement from the U.S. Central Command indicated that support would involve guided-missile destroyers, over 100 land- and sea-based aircraft, and 15,000 service members. However, a subsequent report from Axios suggested the Navy might not necessarily escort ships through the strait.
Earlier, Iran stated that the U.S. had responded to its 14-point proposal via Pakistan and that the response was under review. President Trump, however, expressed skepticism, deeming it unlikely to be acceptable.
Despite these developments, investors adopted a cautious stance, leaving Brent crude futures up only marginally by 0.2% at $108.36 per barrel, having rebounded from an initial drop exceeding 2%. U.S. crude, meanwhile, eased by 0.1% to $101.85.
Concerns about shipping safety persisted, with dealers noting a report of a bulk carrier being attacked by multiple small craft while passing Sirik in Iran on Sunday. Uncertainty remains regarding how many ships would attempt to transit the Strait of Hormuz, even with naval protection.
Asian Market Performance
Trading conditions were subdued due to a holiday in Japan, resulting in Nikkei futures showing only modest gains, closing at 59,810 compared to a cash close of 59,513.
MSCI’s broadest index of Asia-Pacific shares, excluding Japan, advanced by 3%. This rise was primarily driven by tech-heavy South Korean stocks, which surged by 4.6% upon returning from holiday. Hong Kong’s Hang Seng index also recorded a gain of 1.7%.
European and U.S. Futures
Looking to the West, EUROSTOXX 50 futures and DAX futures each added 0.3%. S&P 500 futures gained 0.1%, and Nasdaq futures rose by 0.3%, as markets prepared for over 100 earnings reports scheduled for this week.
Prominent companies slated to report include Advanced Micro Devices, Super Micro Computer, Palantir, Walt Disney, and McDonald’s.
Corporate Earnings and Inflation Warnings
Analysts at Goldman Sachs noted that the S&P 500 EPS growth rate was robust at 25%, or a still strong 16% when accounting for one-off gains. They commented, “Despite elevated energy prices and geopolitical uncertainty, corporate guidance and analyst estimate revisions have remained strong so far this quarter. However, the reward for EPS beats has been unusually small.”
Central Banks and Economic Outlook
Under the heading “CENTRAL BANKS WARN OF INFLATION RISKS”, concerns were highlighted regarding the substantial scale of artificial intelligence capital expenditure investment, now projected at $751 billion for 2026. This figure is $80 billion above estimates at the start of the earnings season and an 83% increase over 2025 spending.
The specter of oil-driven inflation has also pushed bond yields higher, posing a challenge to equity valuations, while several major central banks have adopted a more hawkish stance on monetary policy.
Market expectations now imply only 2 basis points of easing from the Federal Reserve by year-end, a significant shift from 11 basis points a week prior. Conversely, expectations for the European Central Bank have climbed to 76 basis points of hikes, with the Bank of England at 63 basis points.
Australia’s central bank is scheduled to meet on Tuesday and is widely expected to raise its cash rate for the third consecutive time in its ongoing battle against persistent inflationary pressures.
The Federal Reserve’s policy outlook could be influenced by a wave of economic data this week, including the crucial April payrolls report on Friday. Median forecasts anticipate a rise of 60,000 jobs, following March’s larger-than-expected gain of 178,000, though seasonal adjustment issues introduce considerable uncertainty.
Global Currency and Commodity Markets
In currency markets, the dollar was slightly softer as investors awaited further developments in the Middle East and, critically, whether the Strait of Hormuz could be fully reopened.
The dollar was last down 0.4% at 156.54 yen, having earlier dipped to 155.7 yen. Traders were still reacting to last week’s Japanese intervention, which analysts estimated could have amounted to around $35 billion.
Carol Kong, a currency strategist at the Commonwealth Bank of Australia, remarked, “Given the size of the move, I doubt it was the MoF stepping into the market again. Japan and the UK are both on holidays today so it was likely simply market choppiness amid thinner than usual liquidity.” She added, “But fundamentals remain in favour of USD/JPY, meaning USD/JPY will sooner or later recover and force the MoF’s hand again.”
The euro remained flat at $1.1726, while the pound held steady at $1.3584 ahead of local elections in Britain, which could see significant losses for the ruling Labour Party.
In commodity markets, gold remained stable at $4,610 an ounce, trading well within its recent ranges.
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