Key facts
- Asian share markets eased as investors awaited the AI sector's earnings season.
- Oil prices declined due to potential supply increases from OPEC+.
- Futures suggest a high likelihood of the Federal Reserve maintaining current interest rates.
- Cooling energy costs and a weaker U.S. jobs report have influenced the Fed's stance.
- Samsung Electronics is anticipated to announce a substantial profit increase.
Asian share markets experienced caution on Monday as investors awaited a crucial earnings season for the AI sector, while oil prices declined due to potential supply increases. Futures indicate a high probability of the Federal Reserve holding interest rates steady at their upcoming meeting, influenced by cooling energy costs and a softer U.S. payrolls report.
While there were no new developments in U.S.-Iran peace talks, OPEC+ agreed to a further increase in output targets by 188,000 barrels per day from August. This led Brent crude to slip 0.2% to near four-month lows at $71.95 a barrel, and U.S. crude was flat at $68.72.
The cooling in energy costs, combined with a softer U.S. payrolls report, has led markets to scale back the risk of a Federal Reserve rate hike in the near term, with futures implying a 78% chance of a steady outcome at the July 29 meeting. Minutes from the Fed's last meeting are due on Wednesday.
Richard Yetsenga, head of research at ANZ, stated that the Fed is likely to hold rates steady for at least another month, though he noted a risk that the Fed could "run out of patience" given inflation has been above target for five years.
The diminished risk of a rate hike this month allows investors to focus on the upcoming earnings season, with the AI boom expected to deliver strong tech profits. Samsung Electronics is set to report on Tuesday, with analysts expecting an 18-fold increase in profits, potentially reaching 86 trillion won ($56.35 billion).
MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.2%, while Chinese blue chips were little changed. In Europe, EUROSTOXX 50 futures fell 0.1%, while DAX and FTSE futures were flat. S&P 500 futures firmed 0.2%, and Nasdaq futures added 0.7%. U.S. President Donald Trump is scheduled to attend a NATO meeting and meet with Ukrainian President Volodymyr Zelenskiy this week.
Upcoming economic data includes the U.S. ISM Services survey. Several central bankers, including Fed Governor Christopher Waller and ECB President Christine Lagarde, are scheduled to speak at an ECB conference.