Oil prices have risen for four consecutive sessions, combined with hawkish signals from the Federal Reserve, prompting markets to adopt a cautious stance ahead of the US CPI data release.
The four-day rally in oil prices has reignited concerns about inflation, leading to a decline in Asia-Pacific bonds on Tuesday, tracking weakness in US Treasuries. Gold fell 0.3% to $4,376 per ounce on Tuesday, after briefly climbing above the $4,400 level. Investor attention is firmly fixed on the upcoming US Consumer Price Index (CPI) report due Wednesday, which could provide fresh direction for the Federal Reserve's interest rate path. On the geopolitical front, former President Trump has proposed broad new demands in negotiations with Iran, casting further uncertainty over any deal to reopen the Strait of Hormuz and supporting the continued strength of oil prices. Meanwhile, Cleveland Fed President Beth Hammack stated on Monday that multiple interest rate hikes might be necessary to bring inflation down to target levels, amplifying market vigilance regarding interest rate risks.
Asian stock markets showed mixed performance. The MSCI Asia stock index edged up 0.2%, while South Korea's Kospi index gained 1.2%, led by a roughly 5% surge in Samsung Electronics, which boosted the tech sector. The US dollar index extended its gains from the previous session, while the Japanese yen was nearly flat on Tuesday, trading around 159.25 per dollar.
South Korea's Kospi index rose 1.2%, with Samsung Electronics gaining about 5%.
Nasdaq 100 futures increased 0.3%, while European equity futures pointed to a nearly flat open.
The 10-year US Treasury yield climbed 6 basis points to 4.71%.
The Japanese yen traded around 159.25 against the dollar, largely unchanged from the previous day.
The US dollar index was nearly flat at 159.25.
Brent crude oil stabilized near $87.75 per barrel.
Gold fell 0.3% to $4,376 per ounce on Tuesday, after briefly rising above $4,400.
Bitcoin edged down 0.2% to $63,985.33.
Bonds Under Pressure as Inflation Expectations Rise
Asia-Pacific bond markets softened in line with US Treasuries. Bond prices in both Australia and New Zealand fell, following a 6-basis-point rise in the US 10-year Treasury yield to 4.71% on Monday. Due to a public holiday in Japan, US Treasury cash bonds were not traded during the Asian session on Tuesday, and Treasury futures also declined. Rising oil prices are a key driver of the current increase in inflation expectations. Brent crude surged 5% on Monday and stabilized around $87.75 per barrel on Tuesday. Last Friday's US employment data came in below expectations, which had temporarily cooled speculation about an immediate rate hike by the Fed. However, the persistent climb in oil prices has once again brought inflation concerns to the surface. Regarding market direction, Hebe Chen, senior market analyst at Vantage Global Prime, stated, "Asian markets are in a directionless wait-and-see phase before the next macro signal. But beneath the surface, the market landscape is quietly shifting. Oil and gold are rising in tandem again—a combination that has rarely moved together in recent months—which may suggest investors are beginning to adopt new trading logic." Mohit Mirpuri, a partner at SGMC Capital Pte, also noted, "Investors are quite cautious ahead of the US CPI data tomorrow, which will provide more reference for the Fed's rate path."
Fed Officials Send Hawkish Signal, Rate Hike Expectations Rise
Cleveland Fed President Beth Hammack struck a hawkish tone in an interview with Yahoo Finance on Monday, adding uncertainty to market interest rate expectations. Hammack stated, "In general, a single 25-basis-point rate hike may have a limited impact on the economy, so several rate hikes might be needed." However, she also said she did not want to prejudge the exact number of hikes. According to the median forecast from a Bloomberg survey of economists, the US CPI is expected to rise 0.1% month-over-month in July, following a 0.4% decline in June. If this data exceeds expectations, it could further strengthen bets on the Fed maintaining or even accelerating its tightening pace, putting pressure on bond markets and risk assets.
Gold Dips Short-Term, Oil Supported by Geopolitical Factors
Gold fell 0.3% to $4,376 per ounce on Tuesday, after briefly climbing above $4,400. The recent rally received technical support—gold broke above its 100-day moving average on Monday, triggering technical buying. Silver and platinum also strengthened in tandem. In the oil market, Trump on Monday strongly criticized Iran's demands for compensation in negotiations, dimming hopes for talks to end the conflict and reopen the Strait of Hormuz. Reports indicated that Trump had hinted on Sunday that he was willing to let economic pressure continue to build on Iran rather than launching new military strikes. After four consecutive days of gains, Brent crude oil held around $87.75 per barrel on Tuesday.
Asian Stocks Mixed, Australian Dollar Weakens
Sentiment in the tech sector was relatively optimistic. South Korea's Kospi index rose 1.2%, with Samsung Electronics gaining about 5%, supported by shareholder return expectations and export data. Nasdaq 100 futures increased 0.3%, while European equity futures pointed to a nearly flat open. In the currency market, the Japanese yen traded around 159.25 against the dollar on Tuesday, largely unchanged from the previous day. The yen had fallen 1% on Monday, erasing about half of the recent gains driven by intervention, keeping traders alert to possible further intervention by authorities. The Australian dollar weakened on Tuesday after the Reserve Bank of Australia decided to keep its benchmark interest rate unchanged, judging that rising unemployment and a weakening housing market would sufficiently restrain economic activity, thereby pushing inflation lower.
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