SYDNEY — Asian markets kept their nerve on Monday and oil prices climbed anew as the conflict between Israel and Iran showed no sign of cooling, adding geopolitical uncertainty to the world’s economic troubles in a week packed with central bank meetings.
The escalation came just as Group of Seven leaders were gathering in Canada with US President Donald Trump’s tariffs already straining ties.
Yet there was no sign of panic among investors with currency markets calm and Wall Street stock futures steadying after an early dip.
Oil did add 1 percent to last week’s 13 percent surge in an inflationary pulse that, if sustained, should make the Federal Reserve even less likely to cut interest rates when it meets on Wednesday.
Futures imply almost no chance of a reduction in the 4.25 percent to 4.5 percent rate band, and scant prospect of a move in July either. Markets will be particularly sensitive to any change in the Fed’s “dot plot” path for rates.
“The Committee will release a new set of economic forecasts, and we expect that the interest rate forecast ‘dots’, which last showed a median expectation of two cuts this year, will instead look for only one cut this year,” said Michael Feroli, head of US economics at JPMorgan.
Markets are still wagering on two easings by December, with a first move in September seen as most likely.
Data on US retail sales on Tuesday will also be a hurdle, as a pullback in autos could drag the headline down even as core sales edge higher. A market holiday in Thursday, means weekly jobless claims figures are out on Wednesday.
For now, investors were waiting on developments and MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.1 percent.
Japan’s Nikkei firmed 0.8 percent and South Korean stocks added 0.5 percent.
Chinese blue chips added 0.1 percent as data showed retail sales rose 6.4 percent in May to handily top forecasts, while industrial output was in line with expectations.
