Asian share markets showed varied performance on Monday. Initially, most share markets in Asia slipped due to doubts surrounding the Middle East peace process, which led to an increase in oil prices and bond yields. This situation prompted investors to anticipate a higher risk of increased U.S. interest rates, with the Federal Reserve's hawkish stance from the previous week suggesting a 75% chance of a rate hike by September.
However, the market sentiment shifted throughout the day as Iranian negotiators reported progress in peace talks with the United States. This positive development helped to alleviate concerns about a breakdown in the peace process, leading some Asian markets to recover and gain. Qatar and Pakistan officials also confirmed that the first session of talks concluded with progress made on a roadmap for a final deal within 60 days.
Oil prices reflected this volatile sentiment. Brent crude futures initially rose by 1.1% to $81.43 a barrel amidst peace doubts and Iran's closure of the Strait of Hormuz. Later, with the news of progress in talks, Brent crude futures shed early gains, easing to $79.01 a barrel or $80.17 a barrel in different reports. U.S. crude similarly firmed to $78.70 a barrel initially but later eased to $75.29 or $77.52 a barrel. Gold prices also reacted, slipping by 0.1% to $4,154 an ounce during periods of elevated bond yields but bouncing by 0.4% or 1.1% to $4,178 or $4,205 an ounce with peace talk progress.
In currency markets, the U.S. dollar remained supported against the yen at rates around 161.44 to 161.66 yen, primarily due to the Fed's hawkish outlook and only deterred from testing higher resistance by potential Japanese intervention. The euro eased to approximately $1.1462-$1.1464, near its three-month low, while political uncertainty pushed sterling down by 0.2% to about $1.3208-$1.3210.
Stock market performance across Asia varied. Japan's Nikkei edged up 0.7% to 1.9%, continuing an 8% climb from the previous week, reaching all-time highs. South Korea's KOSPI initially fell 0.9% before rallying to add 0.6% to 2.6%, following an 11% surge last week driven by semiconductor stocks. MSCI's broadest index of Asia-Pacific shares outside Japan eased 0.4% initially before gaining 0.8% to 1.0%, while Chinese blue chips either gained 1.6% or remained flat. U.S. and European futures generally saw modest dips, with S&P 500 futures easing 0.2% to 0.5% and Nasdaq futures losing 0.2% to 0.7%.
