Asian Stocks Move Sideways as Oil Surge Meets Softer US Data

Here’s your quick read to start the day: a chatty, no-fuss look at overnight moves, the big story, what’s on the docket, and the tickers you need to watch.

istock.com

By Nandinee Keluskar

Nandinee Keluskar is an independent financial journalist.

August 17, 2026 at 2:28 AM IST

Global Mood: Cautiously Risk-off
Drivers: Ukraine-Russia Deep Strikes Escalate, Hormuz impasse keeps oil elevated

Asian markets traded largely sideways Monday as investors balanced fading US rate-hike expectations against persistent geopolitical and energy risks. MSCI’s Asia-Pacific index was flat, Japan’s Nikkei gained 0.4%, while Australia’s ASX 200 slipped 0.3%; South Korea was closed for a holiday. Brent crude held near $88.50 a barrel after rising 6% last week, keeping inflation and growth risks in focus as the Iran conflict remains unresolved and Hormuz disruptions constrain regional supplies.

Risk appetite received some support from softer US economic signals, with July retail sales declining for the first time in nine months and consumer sentiment weakening, reducing expectations of a near-term Federal Reserve rate hike. Investors now await China’s July activity data and upcoming US retail and earnings indicators for clues on global demand. Meanwhile, renewed US-Iran tensions, the fragile Gaza peace process and intensifying Russia-Ukraine strikes kept geopolitical risks elevated. Overall, markets remain cautiously risk-on but vulnerable to oil and conflict shocks.

THE BIG STORY

Trump's envoys Kushner and Mladenov met with Egyptian, Qatari and Turkish mediators in Cairo on Sunday, with Hamas officials present at some sessions, in a renewed push to advance the Gaza peace plan. The envoys are scheduled to meet Netanyahu on Monday, even as Israel continues airstrikes in Gaza and the prime minister has publicly called Trump's latest roadmap "unacceptable." The central sticking points remain unchanged: Israel insists on Hamas disarmament before any withdrawal, while Hamas demands a halt to attacks and Israeli pullback before implementing any commitments. Over 1,250 Palestinians have been killed since the October ceasefire, and Israeli strikes on tent encampments and residential areas over the weekend injured more civilians, underscoring the gap between diplomatic progress and the situation on the ground.

The Ukraine-Russia war entered a new phase of mutual deep-strike escalation overnight as Russia hit ArcelorMittal's steel plant in Kryvyi Rih, killing two and partially halting production, while striking Kyiv and multiple other regions. Ukraine simultaneously launched one of its largest drone attacks on the Moscow region, striking a Wildberries warehouse 45km from the capital and killing one person, while hitting a missile fuel production facility in Rostov. In a significant NATO incident, a Spanish F-18 on an air policing mission shot down a drone over Romania that appeared to be Russian in origin, the fourth such airspace breach this year. Russia claimed to have downed 822 Ukrainian drones in a single night, underscoring the sheer scale the drone campaign has reached on both sides.

Data Spotlight
The University of Michigan Consumer Sentiment Index fell to 51.0 in early August from 55.2 in July, ending two months of improvement and missing expectations of 54.5. Declines were broad-based but sharpest among older, lower-income and less-educated consumers, with longer-term business condition expectations falling 17%. Year-ahead inflation expectations edged up to 4.3% from 4.2%, driven by higher energy prices tied to the Iran conflict, while long-run expectations held steady at 3.3%.

US retail sales fell 0.6% in July, the first decline since October 2025 and well below expectations of a 0.1% rise, partly distorted by Amazon's Prime Day shift from July to June pulling spending forward. Excluding autos and gasoline, sales fell 0.2%, while the GDP-linked control group dropped 0.4%, the steepest fall since early 2025.

Takeaway: Falling consumer sentiment and a sharp retail sales miss point to a meaningful pullback in household spending momentum, even accounting for Prime Day timing distortions. With inflation expectations edging higher on renewed energy pressures and only 8% of consumers expecting real income gains, the outlook for consumer-driven growth remains under pressure.

WHAT HAPPENED OVERNIGHT

US stocks dip from record highs as weak retail sales and chip valuations weigh

The S&P 500 fell 0.17%, Nasdaq dropped 0.28%, and the Dow slipped 0.20%, pulling back from Thursday's record close as weaker-than-expected retail sales and chip stock pressure weighed.
For the week, the S&P 500 gained 0.4% and Nasdaq added 0.1%, each posting a third consecutive weekly gain, their longest winning streak since early April, supported by strong earnings and easing rate hike concerns.
July retail sales unexpectedly fell after a 0.2% gain in June, while University of Michigan consumer sentiment came in at 51, well below the 54.5 estimate.
Energy stocks gained 1.4% as Hormuz transit appeared at near standstill after two more ship attacks, with the US saying it could maintain its Iranian port blockade indefinitely.
September Fed hold odds stand at 67%, with April-June S&P 500 earnings growth now tracking at 52%, much of it driven by Amazon, Microsoft, and other AI heavyweights.

US Treasury yields climb back toward 19-month highs as inflation expectations and long-end pressure return

The 10-year yield rose to 4.70%, near the 4.75% peak tested earlier in the week, as the University of Michigan's year-ahead inflation expectations rose in August for a fifth consecutive month above 4%.
Warsh's signals that rate hikes may not be his preferred inflation tool continued to drive long-end yields higher, with the 30-year bond rising to a 19-year high.
Lingering concerns that the Fed is being complacent on inflation, recently amplified by the West Asia energy shock, kept upward pressure on longer-dated yields despite softer PPI and weak retail sales.
Potential Japanese yen intervention and subsequent Treasury selling by the largest foreign holder added another structural headwind at the long end of the curve.

Dollar falls toward two-month lows as soft retail sales and inflation data limit Fed hike bets

The dollar index slipped past 99.6, approaching the August 7 two-month low, as July retail sales control group unexpectedly dropped, challenging the consumer resilience narrative.
Back-to-back soft CPI and PPI prints have seemingly reduced the urgency for a September Fed hike, though volatile seasonal effects cloud the retail sales reading.
Foreign funds remained underweight on long-dated US Treasuries relative to earlier this year, reflecting concerns that high price indices and Fed complacency on inflation could lift longer-term inflation expectations.
The dollar held near recent lows following the completion of the US-Japan joint FX intervention, with yen dynamics continuing to shape dollar positioning at the margin.

Oil climbs over $1 as tanker attacks and stalled peace talks support prices into the weekend

Brent settled at $88.52/bbl, up 1.67%, and WTI at $82.40, up 1.42%, with weekly gains of 6.0% and 5.4% respectively.
Iran attacked two ADNOC vessels in the Strait of Hormuz, while Hormuz traffic fell below the month's average amid US-Iran rival control claims.
Treasury Secretary Bessent warned of unprecedented economic isolation measures against Tehran coming next week.
Russia's Sheskharis terminal at Novorossiysk suspended crude exports after a Ukrainian drone attack.
Diesel at $180/bbl and gasoline at $130/bbl are hitting consumers hard, with analysts warning of a "day of reckoning" if Hormuz remains constrained.
Bearish offsets included OPEC and IEA demand downgrades and US crude inventories posting their largest weekly build in over three and a half years.

Day’s Ledger*
Economic Data

Canada July CPI
China July Industrial Production

Corporate Actions

Capital Infra Trust and Fineotex Chemical Limited to consider fund raising

Policy

ECB's Lane Speaks

Tickers to Watch

RELIANCE INDUSTRIES and Rolls-Royce announce strategic intent to jointly develop an indigenous combat engine for India's Advanced Medium Combat Aircraft programme, aimed at strengthening domestic aerospace propulsion capabilities.
VOLTAS net profit rose 52.2% y/y to 2.14 billion rupees in the April-June quarter from 1.40 billion rupees, while revenue increased 18.7% to 46.74 billion rupees from 39.39 billion rupees.
PATANJALI FOODS consolidated net profit rose 86% y/y to 3.36 billion rupees in the April-June quarter from 1.80 billion rupees, while revenue grew 29% to 113.38 billion rupees and EBITDA increased 69% to 5.43 billion rupees.
NMDC standalone net profit rose 2% y/y to 20.07 billion rupees in the April-June quarter from 19.69 billion rupees, ahead of the CNBC-TV18 poll estimate of 19.89 billion rupees.
COCHIN SHIPYARD consolidated net profit declined 27.7% y/y to 1.36 billion rupees in the April-June quarter from 1.88 billion rupees, while revenue from operations fell 6.9% to 9.10 billion rupees from 9.77 billion rupees.
SCHNEIDER ELECTRIC INFRASTRUCTURE profit attributable to owners declined 69.8% y/y to 124.4 million rupees in the April-June quarter from 412.4 million rupees, despite revenue from operations rising 4.8% to 6.51 billion rupees.
EICHER MOTORS arm Royal Enfield launches the updated Continental GT 650 in India with styling and convenience upgrades, with prices starting at 358,427 rupees ex-showroom.
INDUSIND BANK receives a monetary penalty of 5.92 million rupees from the RBI for non-compliance with provisions related to interest rates on deposits and securitisation of standard assets.
ZAGGLE PREPAID OCEAN SERVICES net profit declined 33% y/y to 175 million rupees in the April-June quarter from 261 million rupees, while revenue rose 27.5% to 4.23 billion rupees from 3.32 billion rupees.

Must Read

(*Compiled from various media sources)

See you tomorrow with another edition of The Morning Edge.

Have a great trading day