A brief ceasefire between Israel and Iran eased oil prices, prompting a cautious rally in Asian shares. Analysts warn the rebound may lack breadth.
Sydney, June 9 – Asian stock markets barely recovered on Tuesday, while oil prices fell after Israel and Iran said they had temporarily halted attacks on one another. Investors also supported recent buying after a slide in the semiconductor sector.
Analysts warn that the rebound has limited footing: 60% of major US sector indices ended the previous session lower, though the overall index rose slightly. Equity futures in Europe and the US were also lower in early trading.
Rising bond yields continue to weigh on stock valuations, while tight supplies through the Hormuz Strait keep markets on edge.
Inflation remains so persistent that 46 of the world’s 68 central banks are above target, which helps explain why bond markets are pricing in tighter policy, and why longer-term assets, private credit, and several currencies of developing-market countries are under pressure.
– Bank of America analysts
Our global market breadth rule suggests that almost half of stock markets are already overbought, led by Korea, Taiwan and Finland.
– Bank of America analysts
South Korea’s Kospi rose 3.4%, after Monday’s session saw sharp swings as investors crowded to unwind positions. Japan’s Nikkei gained 0.9%, while the broad Asia ex-Japan stock index advanced 1.5%.
China’s blue chips added 0.4% on May trade data: exports rose 19.4%, imports 27.4%, beating forecasts. This points to China’s success in finding new markets despite trade frictions and weak domestic demand.
In Europe, futures on EUROSTOXX 50 and DAX fell 0.4%, while FTSE dipped 0.2%. S&P 500 and Nasdaq futures were little changed after gains in the previous session. The next big test for the tech sector will be Oracle’s results on Wednesday.
Prices and expectations for rate hikes
Apple shares failed to gain momentum after the long-awaited Siri update at the annual developers conference. OpenAI, the ChatGPT developer, confidentially filed for an initial public offering in the United States, joining Anthropic in the trillion-dollar funding race.
Bond markets remain under pressure: a strong May employment report in the US pushed investors to price in a higher probability of a Fed rate hike. Inflation data due in the US on Wednesday are expected to show energy costs continuing the overall trend toward higher inflation in May.
Futures imply about a 60% probability of a Fed rate hike by October, with a 0.25% increase priced in for December. The yield on the two-year US Treasury rose to 4.170%, its highest in about a year. Expectations for the ECB to raise rates to 2.25% or 2.75% by year-end are rising.
Strong dollar pressure was helped by employment data; the dollar was trading around 160.17 yen per dollar, near the 160.395 peak. The next target is 160.725. Investors are wary of further intervention by Japanese authorities. The euro traded near $1.1538 per euro after a recent nine-month low, and the pound hovered around $1.3347.
Gold remained virtually unchanged near $4,334 an ounce, after hitting a two-month low on Monday at $4,268.39.