Global shares edged higher and the dollar fell to its lowest level since June on Monday after a run of soft U.S. economic data, including an unexpected drop in retail sales, saw markets reduce bets for an imminent rate hike from the Federal Reserve.
A hike next month is now priced at 30%, down sharply from about 50% a week earlier, according to the CME Group's FedWatch tool.
The STOXX benchmark of 600 big European companies inched up 0.04%, led by resources stocks as gold prices advanced, while in the U.S. Nasdaq futures NQc1 firmed 0.5% and S&P futures 0.2% EScv1.
Treasury yields slip and the dollar weakens
"While there is still no resolution to the Iran/Hormuz impasse, our base case remains that oil prices will stay in a $70-$100 range with Iran preventing it going lower and the U.S. moving to try and calm things down whenever it gets above $100," Shane Oliver, chief economist at AMP, said in a note.
"The risk remains that there will be no sustainable peace deal, the flow of oil out of the Middle East remains down 10%-15% on normal levels and that we will have to face higher oil prices as reserves run down."
The bullish run in stocks has been driven by diminishing risk that the Federal Reserve will raise interest rates next month. U.S. retail sales posted the first decline in nine months in July and consumer sentiment soured by more than expected, adding to soft inflation readings.
Earnings are lighter this week but include Home Depot, Target and Walmart, as investors scrutinise the strength of U.S. consumers. The main data point this week is the August S&P Purchasing Managers' Indices (PMIs) to gauge whether the mid-year acceleration in U.S. business activity can be sustained.
In bond markets, U.S. Treasury yields slipped after finishing mixed last week. The two-year U.S. Treasury yield US2YT=RR eased 2 basis points to 4.154%, having fallen 3 basis points last week to touch a seven-week low of 4.0977%.
Ten-year yields US10YT=RR slipped to 4.688%, after rising 4 basis points last week.
The soft run of data has weighed on the dollar, with the euro EUR=EBS hitting a two-month high of $1.1595. The Australian and New Zealand dollars also reached 10-week peaks at $0.7105 and $0.5910 AUD=, NZD=.
In commodity markets, gold bounced 0.43% to $4,394 an ounce XAU=, having climbed 0.8% last week.
Oil, bonds and currencies move on softer data
There was subdued reaction in the Korean won KRW= after U.S. President Donald Trump instructed the Pentagon to substantially reduce joint military exercises with the country, while South Korean markets were closed for a holiday.
Oil prices were mixed after last week's gains. Iran on Saturday called on the U.S. to accept defeat, while Trump urged Americans to accept higher gasoline prices while the conflict continues.
At least 11 people were killed in Israeli strikes in southern Lebanon on Saturday, the Lebanese health ministry said, some of the deadliest in the weeks since the country agreed to a U.S.-mediated peace framework with neighbouring Israel.
Brent crude LCOc1 was last up 1% to $89.42 per barrel after rising 6% last week, while U.S. crude CLc1 reversed earlier losses to be up 0.55%, having gained 5.4% last week.
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