Markets React to Fed Rate Expectations and Middle East Tensions

Asian shares were mostly lower and S. futures declined Monday as investors parsed the implications of a Friday speech by Federal Reserve Chairman Kevin Warsh that reinforced expectations the central bank may raise interest rates soon. European markets were mixed in early trading, with Germany's DAX losing 0.9% and France's CAC 40 edging 0.1% lower, while British markets were closed for a bank holiday.

The futures for the S&P 500 and the Dow Jones Industrial Average slipped 0.3% in Monday trading, according to the Associated Press. On Friday, the S&P 500 had fallen 0.2%, the Dow dipped less than 0.1%, and the Nasdaq composite fell 0.5%.

Oil Prices Jump After US Strike

Oil prices surged more than 3% after S. forces struck Iranian rocket launchers on the Strait of Hormuz, marking their first military action in the area in a month. The Trump administration, just days earlier, had shifted its focus to economic pressure, and a return to open conflict would be dangerous for the region, according to a report from The Atlanta Journal-Constitution.

Brent crude, the international standard, was up 2.9% at $90.61 per barrel early Monday, while S. benchmark crude oil jumped 2.7% to $85.66 per barrel, as reported by the Associated Press.

"The Middle East had finally gone quiet enough for oil traders to start sanding some of the war premium out of crude. Then Sunday arrived, with a reminder that quiet in the Strait of Hormuz is not the same as peace," Stephen Innes of SPI Asset Management said in a commentary carried by multiple outlets.

Fed Chairman's Hawkish Stance Weighs on Sentiment

Markets in Asia fell following Warsh's speech at the annual economic symposium in Jackson Hole, Wyoming. Warsh emphasized wanting to give financial markets fewer clues about the Fed's rate plans and reiterated that "short-term interest rates are the predominant tool" for the central bank, as reported by HuffPost. President Donald Trump, who appointed Warsh, has emphasized that he wants lower interest rates, HuffPost noted.

The yield on the two-year Treasury, which closely tracks expectations about Fed moves, jumped to 4.35% from 4.22% just before Warsh's speech, according to the Associated Press. Longer-term yields also rose following some initial zigzags, though not by as much as shorter-term yields; the 10-year Treasury yield climbed to 4.72% from 4.67% late Thursday.

Worries had grown that Warsh's tough talk about getting inflation down to the Fed's 2% target may be just that, the Associated Press reported.

Regional Market Performance

In Tokyo, the Nikkei 225 lost 0.1% to 66,311.93, while the Kospi in South Korea reversed earlier losses, gaining 0.5% to 6,820.02, according to the Associated Press. Hong Kong's Hang Seng lost 0.1% to 25,566.99, and the Shanghai Composite gained 0.9% to 3,986.30.

Elsewhere, Australia's S&P/ASX 200 lost 0.2% to 9,076.00, Taiwan's Taiex fell 0.4%, and India's Sensex slipped 0.4%, as reported by the Associated Press.

In currency markets, the S. dollar fell to 159.85 Japanese yen from 160.10 yen, while the euro rose to $1.1588 from $1.1580, the Associated Press reported.

Corporate and Economic Developments

Shares in e-commerce and fast fashion giant Shein are due to begin trading in Hong Kong on Tuesday in the city's biggest initial public offering this year, part of a trend toward big Chinese-founded companies raising funds in Chinese markets, according to the Associated Press.

An official survey released Monday showed Chinese factory activity remained in contraction for a second straight month in August, though there were slight improvements in some areas such as new export orders and production, the Associated Press reported.