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Hormuz tensions hit Asian stocks

Renewed fighting between the US and Iran around the Strait of Hormuz pushed crude prices sharply higher on Monday, weighing on risk sentiment in Asia as investors assessed the risk of another energy-driven inflation shock. Asian equities were broadly lower, led by a steep drop in South Korea and heavy losses in regional chip stocks, while US stock markets had finished Friday in positive territory following SK Hynix’s strong Wall Street debut. European indices were mixed at the end of last week after German inflation moderated in June. Markets will also focus this week on US inflation figures and the start of the second-quarter corporate earnings season.

  • Date
  • Author Shane Strowmatt, Senior Investment Writer
  • Reading time 5 minutes

Oil
© Shutterstock

Oil prices rose sharply to start the week after the US and Iran exchanged strikes amid a dispute over control of the Strait of Hormuz, a key route for global energy exports. West Texas Intermediate (WTI) futures gained 4.5% to USD 74.61 per barrel, while Brent crude oil futures climbed 4.4% to USD 79.38, as the US military said it had launched further attacks on Iran following strikes on Saturday. Iran said it had closed the strait and targeted US military sites in several Gulf countries, but US officials disputed the closure. Gold extended its decline on Monday after the fighting revived concerns that higher energy costs could keep the Federal Reserve restrictive. The yellow metal was down 1.4% to around USD 4060 per ounce, while silver fell 2.7% to around USD 58 per ounce. Meanwhile, the US Dollar Index edged up 0.1% to 101.09 points.

Asian stocks fall as oil rises

Asian equity markets declined on Monday as the renewed tensions weakened risk appetite, with Korea’s Kospi tumbling 8.6%. Chipmakers led the regional sell-off, as Samsung Electronics dropped nearly 8% and SK Hynix fell 12%, after making a solid trading debut in the US last week. Japan’s Nikkei 225 fell 2.6%, Australia’s S&P/ASX 200 was little changed, Hong Kong’s Hang Seng Index slipped 0.1% and mainland China’s CSI 300 dropped 2.1%.

US inflation, bank earnings in focus

While geopolitics dominates the headlines on Monday, attention turns later in the week to US inflation and the start of the second-quarter earnings season. The United States releases the June Consumer Price Index on Tuesday and the June Producer Price Index on Wednesday, giving markets fresh signals on price pressures and the Federal Reserve’s monetary policy path. US earnings season also begins in earnest on Tuesday, with JPMorgan, Bank of America, Goldman Sachs, Wells Fargo, and Citigroup all reporting quarterly results. Growth data are also in focus, with China publishing second-quarter gross domestic product and June industrial production on Wednesday, while the United Kingdom releases May gross domestic product on Thursday. In monetary policy news, the Bank of Canada announces its interest rate decision on Wednesday.

US stocks rise after SK Hynix debut

US equities gained on Friday last week as South Korean memory-chip maker SK Hynix made a strong US market debut, with the Dow Jones Industrial Average up 0.3% at 52,637.01 points, the S&P 500 rising 0.4% to 7575.39 points and the Nasdaq 100 adding 0.3% to 29,825.11 points. SK Hynix shares opened at USD 170, climbed as high as USD 177 and closed at USD 168.33, leaving them 13% above the USD 149 issue price and lifting other semiconductor stocks including Nvidia and AMD.

German inflation eases in June

German consumer price inflation slowed to 2.3% year-on-year in June from 2.6% in May and 2.9% in April, Destatis confirmed on Friday, while prices fell 0.3% from the previous month. Energy remained an important source of price pressure, rising 3.4% from a year earlier, but the increase moderated sharply as fuel and heating oil became cheaper compared with May. Major European equity indices were mixed, with the Euro Stoxx 50 slipping 0.2% to 6269.97 points, Germany’s DAX losing 0.2% to 25,067.09 points and France’s CAC 40 rising 0.2% to 8338.97 points, while the Swiss Market Index added 0.1% to 14,235.09 points.

Corporate and economic calendar

Corporate news in focus: There is no major corporate news scheduled today.

Economic data in focus: Bundesbank monthly report (12:00).

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