NEW YORK/LONDON, Aug 10 — European shares and major Wall Street indexes were lower on Monday, with markets focused on the outlook for Federal Reserve interest rates and on a potential deal between the United States (US) and Iran to reopen the Strait of Hormuz.
Oil prices jumped after Iran insisted that the United States must satisfy several demands before the Strait can reopen.
On Wall Street, the Dow Jones Industrial Average fell 0.12 per cent to 53,974.62, and the Nasdaq Composite lost 0.17 per cent to 26,645.08. The S&P 500 bucked the trend, edging 0.02 per cent higher at 7,759.27.
US stocks had hit a record high on Friday after a weaker-than-expected jobs report caused traders to cut their bets on US Federal Reserve (US Fed) rate hikes.
The pan-European STOXX 600 index fell 0.16 per cent on Monday, and Europe's broad FTSEurofirst 300 index dropped 0.14 per cent.
The MSCI index of global stocks clung to gains, up 0.05 per cent.
On Sunday, Iran said that a deal with Oman on transit through the Strait of Hormuz was in its final stages, but reiterated that the waterway would reopen only once the US met other conditions. Those include compensation and an end to sanctions and military threats.
Brent crude futures rallied 3.06 per cent to US$86.11 per barrel, and US crude jumped 3.26 per cent to US$80.73. Global benchmark prices still remained well below late April's peak of more than US$126 a barrel.
The key event for markets this week is the US inflation reading for July on Wednesday, which will impact US Fed officials' thinking on rates. Investors will also be watching euro zone employment data and US consumer price figures for clues on the interest rate outlook.
Economists polled by Reuters expect the consumer price index to have risen 3.4 per cent year-on-year in data on Wednesday, compared with 3.5 per cent the previous month.
"We are keeping our view of no hikes from the US Fed for this year," said Jefferies' senior European economist Mohit Kumar, noting this week's inflation report is key.
"If oil prices remain contained and move lower from the current levels, that would prevent the need for the US Fed to hike rates," he added.
Asian shares rose overnight, with MSCI's broadest index of Asia-Pacific shares outside Japan closing up 0.61 per cent at 1,628.74.
Emerging market stocks rose 0.66 per cent to 1,668.75.
Earnings help power stocks
Stock markets around the world have hit record highs in recent weeks, boosted by strong corporate earnings.
Analysts at BofA said that with nearly 90 per cent of S&P 500 results in, earnings per share were up 30 per cent on the year after excluding investment gains at Alphabet and Amazon. A 76 per cent EPS beat rate matched the strongest level since 2021.
Strategists at JPMorgan revised up their 2026 EPS estimate to US$365, marking annual growth of 35 per cent, and lifted their S&P 500 price target to 8,000 from 7,800. It is currently at 7,758.
Earnings are lighter this week, but include semiconductor company Applied Materials, networking equipment maker Cisco, and cloud infrastructure technology company CoreWeave.
Bonds and currencies
The yield on benchmark US 10-year notes rose 3.03 basis points to 4.688 per cent, with the market bracing for US$125 billion (RM511.3 billion) in new issuance this week.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.15 per cent to 99.79, while the euro fell 0.11 per cent to US$1.1545.
The Japanese yen weakened by 0.75 per cent to 158.97 per dollar, though investors remained wary of intervention.
Bank of Japan policymakers warned of mounting inflation risks that could require a faster-than-expected pace of interest rate increases, a summary of opinions at their July meeting showed, boosting the case for a September hike.
