Asian stocks and bonds are poised for gains, tracking a Wall Street rally driven by a decline in oil prices. This pullback in oil has eased inflation concerns, thereby reviving appetite for risk among investors. Equity-index futures for Japan, South Korea, and Australia all indicate an upward trend at market open, while U.S. stock contracts saw little change after underlying benchmarks achieved their largest advance in six weeks, with the S&P 500 increasing by 1.1% and the tech-heavy Nasdaq 100 gaining 1.7%. A key index of chipmakers jumped 3.1%.
Stocks and Treasuries rebounded as oil prices slipped amid indications that supply disruptions in the Middle East are set to ease, fostering optimism that inflation can be controlled. Scott Rubner of Citadel Securities noted that while September might remain volatile for equities, "the setup is beginning to change." The Bank of Japan is also anticipated to implement its second rate hike in three months; however, strategists caution that the yen might weaken unless officials can convince markets of further tightening measures. A rate hike could also diminish the appeal of the yen carry trade by making the currency more expensive to borrow.
Falling oil prices are contributing to hopes that the worst inflation fears will not materialize. Brent crude is on track for consecutive losses, dropping over 2% towards $103 a barrel. Signs of easing supply disruptions in the Middle East, such as Saudi Arabia's goal to restore about half the capacity of its East-West pipeline within days and increased oil sales to Asian refiners, are driving this decline. Panmure Liberum strategist Joachim Klement suggests that current market expectations for additional rate hikes in 2027 are likely overstated, predicting that the next movement in bond yields will be lower, which should, in turn, bolster stock markets.
