Oil prices jump; optimism over China's consumption stimulus boosts Asia shares

Oil prices surged on Monday, U.S. stock futures slid while those in Asia charged higher as investors took stock of the contrasting fortunes between the United States and the rest of the world.

The week is a busy one with a series of central bank policy meetings, including by the U.S. Federal Reserve. It is widely expected to keep rates on hold when its meeting concludes on Wednesday.

Over the weekend the U.S. defense secretary said the country would continue attacking Yemen's Houthis until they ended attacks on shipping, sending oil prices sharply higher in early Asia trade on Monday as investors worried about disruptions to supply.

Brent futures were up 1.06% at $71.33 per barrel, while U.S. West Texas Intermediate crude futures also jumped 1.12% to $67.94 a barrel.

"We've got a reemergence of those geopolitical tensions," said Tony Sycamore, a market analyst at IG. "If crude oil gets much above $68.50, I think that could really start to trigger some short covering in the market."

Also supporting oil prices were growing expectations of a revival in Chinese demand, after Beijing announced new efforts to boost consumption in the world's second-largest economy.

China's State Council unveiled on Sunday a slew of measures including increasing residents' income and establishing a childcare subsidy scheme aimed at boosting domestic consumption.

That came just days after the country's financial regulator promised to properly relax consumer credit quotas and loan terms as it offers long-term backing to make available large sums.

"In our view, there's considerable focus on increasing both the capacity and willingness of households to consume," said Lynn Song, ING's chief economist for Greater China.

"We think this year's attention to boosting consumption, combined with last year's relatively low base, will help consumption growth recover to mid-single-digit growth in 2025. Further upside would likely hinge on a sustainable recovery of consumption."

Investors are now awaiting a press conference later in the day by Chinese officials from the top planning agency and elsewhere for details on additional measures to enhance domestic consumption.

The yuan was last 0.2% higher at 7.2265 per dollar in the onshore market, while its offshore counterpart gained 0.17% to 7.2268.

Separately, official data on Monday showed China's industrial output rose a more than expected 5.9% in the first two months of the year from a year earlier, while property investment continued to be a drag.

Markets hardly reacted to the data releases, though the CSI300 blue-chip index reversed early gains to last trade 0.07% lower.

The Shanghai Composite Index was still up 0.28%, while Hong Kong's Hang Seng Index jumped more than 0.8%.

That helped extend early gains in MSCI's broadest index of Asia-Pacific shares outside Japan, which last traded 1% higher at a one-week top.

Japan's Nikkei advanced 1.24%.

U.S. drubbing

While Asia stocks started the week on a strong note, over in the United States, futures pointed to a dour opening on Wall Street.
Nasdaq futures were down 0.44% in the Asian session, while S&P 500 futures fell 0.4%.

U.S. Treasury Secretary Scott Bessent said in an interview that aired on Sunday that there are "no guarantees" there will not be a recession in the United States, adding to investor worries of an impending economic downturn.

U.S. President Donald Trump had, a week earlier, declined to predict whether the U.S. could face a recession amid concerns about his tariff salvo.

"When you've got the top two — President Trump and his right-hand man in terms of economic affairs — refuse to rule out a recession, it does warn us that there's more rocky times ahead," said IG's Sycamore.

"And it suggests to me that they're willing to take this short-term pain for a longer-term win."

European futures meanwhile edged higher, with EUROSTOXX 50 futures gaining 0.2%, while FTSE futures advanced 0.36%.

European stocks and its currency have in recent times drawn support from Germany's fiscal reset plan aimed at bolstering defense and reviving growth in Europe's biggest economy.

The country's parliamentary budget committee on Sunday approved the bill, which includes a 500 billion euro ($540 billion) fund for infrastructure and changes to borrowing rules.

The euro was perched near a five-month high on Monday and last bought $1.0882.

In other currencies, the dollar languished near a five-month low against a basket of currencies.

Investor nerves and angst over the unpredictability of Trump's policies and their potential impact on U.S. growth have hampered the greenback, which has fallen more than 4% for the year so far.

The yen was firm at 148.59 per dollar, ahead of the Bank of Japan's (BOJ) policy meeting this week where it is expected to keep rates on hold, though most economists expect further policy tightening later this year.

Elsewhere, gold hovered near a record high and was last at $2,991 an ounce, having broken through the key $3,000 barrier for the first time on Friday as investors piled on to an historic rally in the safe-haven asset.