Oil above $106, Asian markets open the week cautiously: bond yields at a 20-year high

Stocks in Asia opened the week cautiously on Monday, as oil gained ground again amid growing doubts that the United States and Iran will soon reach a ceasefire, while government bonds came under pressure in a week packed with economic data, as Reuters reports.

Over the weekend, U.S. President Donald Trump rejected the Iranian proposal to reopen the Strait of Hormuz, saying talks would continue this week, even though Tehran is showing no signs of softening its terms.

Brent crude rose 1.6% to $106.00 a barrel, taking the monthly gain to 17%, while U.S. crude climbed 1.1% to $93.47. A lack of refining capacity has meanwhile pushed diesel prices to historic record highs, well above those of crude oil — a development that raises the risk of inflation becoming entrenched in prices and wages.

Central banks have begun a new round of monetary-policy tightening, with the Reserve Bank of Australia expected to raise rates on Tuesday. Markets are pricing a 66% chance that the U.S. Federal Reserve will raise interest rates for the second straight month in October. The yield on 30-year U.S. bonds hit 5.5185%, near its highest since 2004, up 27 basis points in September, while 2-year yields are up 55 basis points this month. Bank of America strategist Mark Cabana said: “The repricing may not stop until there is clear evidence that financial conditions have become sufficiently restrictive.”

On the data calendar, the U.S. September jobs report, out Friday, is expected to show 85,000 new jobs and unemployment at 4.1%. The dollar index climbed to a two-month high at 101.39; the euro traded at $1.1380, the dollar at 157.53 yen and sterling at $1.3228, while gold fell 0.5% to $4,262 an ounce. The Atlanta Fed’s GDPNow gauge forecasts 5.0% economic growth for the quarter. JPMorgan chief economist Bruce Kasman said “the global expansion appears to have entered a phase of broad strength rarely seen in the last two decades.” In Asian markets, the Nikkei index rose 0.8%, while Korean stocks fell 0.6%, according to Reuters.