Asia report: Stocks rise as oil prices fall back

(Sharecast News) - Asia-Pacific markets rallied on Monday as oil prices fell sharply following a weekend pause in fighting between the US and Iran.

Investors also looked ahead to earnings from Amazon, Apple, Meta Platforms and Microsoft, which could influence sentiment towards artificial intelligence spending and semiconductor shares, as well as Wednesday's Federal Reserve decision.

Markets expect a rate increase by September but are also pricing in a meaningful chance of a quarter-point rise this week.

"Markets have been handed a ceasefire-flavoured relief rally, but not a clean geopolitical all-clear," said Patrick Munnelly, market strategy partner at TickMill.

"The US and Iran stepping back from immediate escalation has pulled Brent sharply lower, lifted bonds and equities, and taken some pressure off central-bank pricing.

"Yet the move is better described as a repricing of imminent escalation risk than a removal of the Middle East risk premium.

"Red Sea tensions, Hormuz uncertainty and the durability of the pause still matter."

Brent crude dropped 8.11% to $88.93 a barrel and West Texas Intermediate fell 6.57% to $83.44 after Iran reportedly said it would suspend attacks while the US refrained from further strikes.

Washington paused its bombing campaign after advisers reportedly warned president Donald Trump that viable targets were becoming scarce and raised concerns about US weapons stockpiles.

"But the relief comes with three important qualifications," Munnelly added.

"First, tensions between Saudi Arabia and the Houthis continue to threaten Red Sea oil traffic, particularly around the Bab el-Mandeb Strait.

"Second, there is no certainty that the US-Iran pause will prove durable.

"Third, a pause in strikes does not mean Strait of Hormuz traffic normalises, as Iran and Oman continue negotiations over a transit arrangement.

"The energy market has not gone back to normal; it has merely stepped back from the cliff edge."

Markets finish higher across the region

Japan's Nikkei 225 gained 0.5% to 64,931.19 and the Topix rose 1.37% to 4,066.07.

Shift climbed 9.32%, BayCurrent advanced 8.95% and Shiseido gained 7.62%.

China's Shanghai Composite rose 1.15% to 3,858.24, while the Shenzhen Component jumped 2.72% to 14,148.73.

Guangzhou Fangbang Electronics gained 10.71%, Jiangsu SINOJIT Wind Energy Technology rose 10.1% and Heilongjiang ZBD Pharmaceutical added 10.09%.

Industrial profits increased 15.1% year on year in June, slowing from 21.1% in May, while first-half earnings rose 18.7%, compared with 18.8% in the first five months, as AI-related manufacturing growth and the end of factory-gate deflation supported the sector.

Hong Kong's Hang Seng Index advanced 0.98% to 25,207.18, led by Xiaomi, up 7.34%, Galaxy Entertainment Group, which gained 6.26%, and Laopu Gold, which rose 5.65%.

South Korea's Kospi 100 added 1.32% to 8,362.38, with Naver jumping 8.43% after announcing a KRW 1.48trn share issuance to Nvidia.

Nvidia also unveiled a partnership with Naver and Brookfield to expand South Korea's national AI factory infrastructure.

Woori Financial Group rose 7.29% and KakaoPay gained 6.8%.

"That distinction explains the broader asset-price reaction," Munnelly said.

"Treasuries rallied, with the 10-year yield down around 5bps to 4.63%, roughly 8bps below last week's peak.

"European bond futures rose, and government debt across Asia Pacific also gained.

"Lower oil has reduced inflation anxiety and allowed duration to recover some ground. Equities have taken the hint.

"The MSCI Asia Pacific Index rose 0.5%, while Nasdaq 100 futures gained 1.2%, pointing to a recovery after last week's chip-led selloff.

"European markets are also set for a firmer open. This is a classic relief move: lower oil, lower yields, softer Dollar, better risk appetite."

Australia's S&P/ASX 200 climbed 1.39% to 8,894.00, as Capricorn Metals surged 15.13%, Wisetech Global rose 7% and Emerald Resources advanced 6.17%.

New Zealand's S&P/NZX 50 gained 0.57% to 13,850.69, with Spark New Zealand up 3.73%, Synlait Milk rising 2.63% and Investore Property adding 2.3%.

Dollar weaker against regional G10 peers

In currency markets, the dollar fell 0.17% against the yen to JPY 163.55, declined 0.32% against the Australian dollar to AUD 1.4283 and eased 0.06% against the New Zealand dollar to NZD 1.7251.

Reporting by Josh White for Sharecast.com.