Asia Stocks Edge Higher, Oil Up Amid Gulf Confusion

Asian share markets followed Wall Street higher on Monday, buoyed by a softer-than-expected U.S. jobs report that tempered expectations of an imminent interest rate increase. The report eased concerns about borrowing costs, providing a lift to equities across the region.

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Our forecast for core CPI of 0.22 per cent is probably not quite firm enough to prompt a hike from the Fed at the September meeting, though repeated prints closer to 0.3 per cent could do it.

Meanwhile, oil prices saw a modest increase amid a lack of significant progress in Gulf peace talks. Brent crude climbed 0.9 percent to $84.32 a barrel, while U.S. crude rose 0.7 percent to $78.74 a barrel. Shipping through the Strait of Hormuz remained constrained, contributing to the upward pressure on oil prices.

In the U.S., the upcoming July consumer price report is a key focus, with analysts anticipating a slight rise. Any unexpected acceleration in inflation could reignite speculation about a Federal Reserve rate hike in September. The futures market has already scaled back the probability of a September move.

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One thing we are watching for is any rebound in core goods prices after a two-month stretch in which they fell.

Corporate earnings in the U.S. have shown robust performance, with nearly 90 percent of S&P 500 companies reporting. Earnings per share saw a significant year-on-year increase, largely driven by the artificial intelligence sector, which posted substantially higher growth compared to non-AI related stocks. This strong earnings season has contributed to a positive sentiment in the markets.

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AI remains the stand out, with median EPS growth of 28 per cent versus 12 per cent for non-AI related stocks, though consensus expects AI to slow to 16 per cent next quarter.