Japan's Nikkei edged up 0.4%, while South Korea's chip-heavy index gained 0.6%. (EPA Images pic)HONG KONG: Share markets rallied in Asia on Monday as a pause in fighting in the Gulf dragged oil prices sharply lower, easing inflation risks and boosting bonds ahead of a packed week of central bank meetings and corporate earnings.Iran said on Sunday it would halt its own attacks as long as the United States did the same, with the US military reportedly concerned about dwindling supplies of ammunition.Yet, Yemen's Iran-aligned Houthis had still attacked Saudi oil installations along the Red Sea coast, threatening another waterway vital to the global oil trade."Net, it looks as if developments in the Middle East have moved in a positive direction over the weekend, adding some credibility to the notion that oil above US$100 a barrel seems to induce de-escalatory behaviour from both sides," said Sally Auld, group chief economist at NAB.The lull in fighting over the Strait of Hormuz saw Brent crude slide 5.2% to US$91.73 a barrel, while US crude dropped 5.4% to US$84.45.The pullback in oil provided some relief from inflation fears and led markets to slightly pare the probability of rate hikes from the US Federal Reserve.The central bank meets on Wednesday and markets imply around a one-in-three chance of a rate rise, though most analysts doubt chair Kevin Warsh would be in favour of a move."Investors see the outcome of the July meeting as unusually uncertain, likely because the Fed has been split recently, Warsh's own position remains unclear, and some of the re-escalation with Iran occurred during the blackout period," noted analysts at Goldman Sachs."There will likely be at least one dissent in favour of a hike, but most voters appear unlikely to push for a move this week after the softer June inflation data."The Bank of England holds its meeting on Thursday and the Bank of Japan on Friday, and both are expected to hold steady while remaining cautious about inflation risks ahead.Tech earnings to test bullsEquities took comfort in the drop in oil and yields, sending S&P 500 futures up 0.8%, while Nasdaq futures jumped 1.3%. In Europe, EUROSTOXX 50 futures and DAX futures both rose 0.6%, while FTSE futures added 0.1%.Japan's Nikkei edged up 0.4%, while South Korea's chip-heavy index gained 0.6%.
MSCI's broadest index of Asia-Pacific shares outside Japan added 0.3%.…
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