Asian stocks rise ahead of inflation tests and oil price rise

By Wayne Cole

SYDNEY (Reuters) – Asian shares rose cautiously on Monday, while the dollar and bond yields slipped ahead of the release of inflation data that investors hope will pave the way for interest rate cuts in the United States and Europe.

Oil prices rose 0.7% after Israel and Hezbollah exchanged rocket fire and air strikes on Sunday, raising fears of possible supply disruptions if the conflict escalates.

Brent rose 51 cents to $79.53 a barrel, while U.S. oil rose 50 cents to $75.33 a barrel. [O/R]

Investors are also eagerly awaiting AI darling Nvidia's earnings results on Wednesday to see if the company can meet the market's inflated expectations.

The stock has risen about 150% since the beginning of the year, accounting for about a quarter of the S&P 500's 17% gain since the beginning of the year.

“Nvidia will beat consensus expectations, they always do, but investors are so fixated on revenue being $2 billion or more above analyst consensus, otherwise it could easily become a sell-the-news event,” said Chris Weston, head of research at broker Pepperstone.

That means Nvidia would have to report revenue of $30 billion or more and third-quarter guidance of $33 billion or more, he added.

Early Monday, S&P 500 futures and Nasdaq futures lost 0.1 percent. [.N]

MSCI's broadest index of Asia-Pacific stocks outside Japan rose 0.4 percent, after rising 1.1 percent last week, while South Korea rose 0.3 percent.

Japan's Nikkei fell 0.7 percent as a stronger yen put pressure on exporters' shares.

The yen rose on Friday on the back of a generally weaker dollar after Federal Reserve Chairman Jerome Powell said it was time to start easing monetary policy and stressed that the central bank did not want a further weakening of the labor market.

“Importantly, many of the caveats used by other Fed officials, such as 'gradualism,' were conspicuously absent,” noted Tapas Strickland, head of market economics at NAB.

“The Sept. 6 jobs report is clearly important as Powell is willing to cut rates to ward off downside risks to employment and maintain a strong labor market,” he added. “In summary, Powell has increased the odds of a soft landing.”

Many cuts are coming

US personal consumption and core inflation figures are due out on Friday, along with a preliminary forecast for inflation in the European Union. Analysts generally expect the data to be favorable enough to allow interest rate cuts in September.

Fed funds futures are fully priced in for a quarter-point cut at the Sept. 18 meeting, implying a 36 percent chance of an outsized move of 50 basis points. The market has also priced in 103 basis points of easing this year and another 122 basis points in 2025.

The story continues

“We continue to expect the FOMC to initially make three consecutive rate cuts of 25 basis points each at the September, November and December meetings,” said Goldman Sachs analysts.

“Our forecast is based on the assumption that the August employment report will be better than the July one. However, we continue to believe that a 50 basis point cut would be likely if the August report were weaker than expected.”

Markets have also priced in a quarter of a percentage point interest rate cut by the European Central Bank next month and a total easing of 163 basis points by the end of 2025.

The two-year Treasury yield was at 3.91%, after falling nearly 10 basis points on Friday, while the 10-year yield remained at 3.79%. [US/]

The dollar slipped another 0.3 percent to 143.97 yen, after falling 1.3 percent on Friday. The euro rose to 1.1190 dollars, just below its 13-month high, while the Swiss franc remained stable at 0.8472 against the dollar. [USD/]

A weaker dollar and lower bond yields support gold prices at $2,516 an ounce and close to an all-time high of $2,531.60. [GOL/]

(Reporting by Wayne Cole; Editing by Shri Navaratnam)