Asian stocks climbed on Monday after a surprisingly weak US jobs report eased fears of an imminent Federal Reserve rate increase, helping risk appetite recover even as oil prices moved higher on renewed uncertainty around the Strait of Hormuz.
Japan’s Nikkei 225 rose about 2%, South Korea’s KOSPI added 1.1% and MSCI’s broadest Asia-Pacific gauge outside Japan gained 0.8%.
The advance followed record closes on Wall Street on Friday, where investors treated softer hiring as a reason for the Fed to stay patient.
China moved in the other direction, with the CSI 300 down 0.4% after inflation data reinforced concerns about sluggish domestic demand.
Weak jobs data resets the Fed debate
Friday’s payrolls report changed the tone across global markets.
US nonfarm employment fell by 23,000 in July, while May and June were revised down by a combined 103,000 jobs.
The unemployment rate edged lower to 4.1%, largely because labour-force participation fell to 61.4%.
That was enough to push expectations for a September Fed increase sharply lower.
Futures markets put the probability of a quarter-point move at about 44% on Monday, down from roughly two-thirds a week earlier.
The next test comes on Wednesday, when the US releases July consumer-price data. Economists expect headline CPI to rise 0.1% from June and core prices to increase 0.2%.
The Bureau of Labor Statistics has scheduled the release for August 12 at 8.30 am ET.
JPMorgan economist Michael Feroli sees a core reading around 0.22% as probably insufficient on its own to force a September move, but believes repeated readings nearer 0.3% would strengthen the case for tighter policy.
Treasury yields edged higher in Asia after Friday’s rally, with the 10-year yield around 4.66%.
Nikkei and KOSPI ride Wall Street’s rebound
Lower US rate-hike expectations gave Asian technology markets some breathing room after several weeks of sharp moves in AI-linked shares.
The Nikkei’s 2% gain put Japan among Monday’s strongest major markets, while the KOSPI rose 1.1% after seven consecutive weekly declines.
Both benefited from the rebound in US technology shares and lower bond yields, though their domestic risks remain different.
For Japan, the yen is still the pressure point. The dollar traded near 158.2 yen after last week’s intervention by Japan and the US.
At the same time, the Bank of Japan’s summary of its July meeting showed policymakers becoming more concerned about inflation overshooting its 2% goal. Some members argued that rate increases may need to come faster than markets expect.
The BOJ kept its policy rate around 1% in July, rejecting a proposal for an immediate increase to 1.25%.
The more hawkish debate nevertheless strengthens the case for another move and could limit the support Japanese exporters receive from a weak yen.
South Korea faces a different challenge.
The KOSPI is recovering from a severe correction in its semiconductor trade, leaving Samsung Electronics and SK Hynix highly sensitive to shifts in US yields and AI sentiment.
Oil and China keep the rally from looking clean
The risk-on tone was complicated by higher energy prices. Brent rose about 1% to $84.40 a barrel and US crude gained 0.8% to $78.80 as shipping through the Strait of Hormuz remained restricted.
Iran said an agreement with Oman defining new shipping lanes was nearing completion, but reiterated that the strait would not fully reopen until Washington met additional conditions.
That uncertainty keeps a geopolitical premium in crude just as lower oil had started to ease inflation fears.
China supplied another note of caution. Producer-price inflation slowed to 3.5% in July from 4.1% in June, while consumer inflation eased to 0.5%.
ANZ strategist Zhaopeng Xing views the slowdown as a combination of softer energy costs and still-weak domestic demand, with the effects of faster fiscal spending likely to arrive only gradually.
Corporate earnings remain the main counterweight.
With nearly 90% of S&P 500 companies having reported, Bank of America estimates underlying earnings growth at about 30% after stripping out investment-related gains at Alphabet and Amazon.
The bank also sees median earnings growth of 28% among AI-linked companies, compared with 12% elsewhere.
That strength helped US equities reach fresh highs last week.
For Asia, Monday’s rebound still rests on a delicate balance: softer US data must cool the Fed without signalling a deeper downturn, while oil needs to stay contained enough to prevent inflation from returning as the market’s dominant risk.
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