Asian stocks expected down amid Middle East tensions and oil price rise; inflation concerns heighten with potential monetary tightening.Yen gains near February peak
(Sept 8) : Asian stocks were set to edge lower as tensions in the Middle East pushed oil prices higher, adding to inflation concerns and keeping investors wary of the prospect of further monetary tightening. The yen held gains near its highest level since February.
Equity-index futures for Japan, Australia and Hong Kong pointed to declines at the open, while those for South Korea signaled gains, tracking advances in Nasdaq 100 contracts. S&P 500 futures dropped after fluctuating in the previous session, when cash markets were closed for a public holiday.
US crude opened higher on Tuesday after Brent briefly topped US$98 a barrel on Monday. Iran said a deal with Oman to manage shipping through the Strait of Hormuz is imminent, raising questions over how the US will respond after striking Iranian vessels over the weekend. Tehran also warned ships face the risk of attack near Oman’s coastline.
The yen strengthened to its highest level since February, surpassing the peak reached after coordinated intervention by Japan and the US. The dollar slipped 0.2% on Monday, while copper surged to an all-time high.
Higher energy prices are adding to inflation concerns as investors weigh the prospect of tighter monetary policy. A packed week of US data culminates with Friday’s inflation report, which may prove pivotal to whether the Federal Reserve raises rates or stays on hold.
“Markets will be adjusting their positioning heading into the Fed’s blackout period. The risk is the Fed turning hawkish and that will be reflected in equities,” said Geoff Yu, a senior macro strategist at BNY. “Bond markets will remain nervy and we remain focused on fixed-income volatility.”
In Asia, the yen will remain in the spotlight after the currency abruptly extended gains Monday, rising as much as 1.4% to 154.06 per dollar in London trading. There was no clear catalyst, with some traders pointing to thin liquidity during the US holiday and others citing a break through the key 155 level.
The yen began rallying last week as growing bets on Bank of Japan interest-rate hikes triggered a sharp shift in sentiment toward the currency.
In commodities, copper surged to a record on the London Metal Exchange, extending a weeks-long rally driven by expectations that President Donald Trump will broaden US tariffs to imports of refined metal. Gold advanced in early Tuesday trading.
