The latest Market Talks covering Energy markets. Published exclusively on Dow Jones Newswires throughout the day.
1105 ET - The yield difference between short-dated gilts and their long-dated equivalents could widen further, Bank of America strategists say in a note. This week's BOE policy meeting indicated that there are no signs of second-order inflation effects so far, easing concerns about the prospects of rapid BOE rate increases in the coming months. Short-term gilt yields are expected to fall as markets adjust their BOE rate expectations, while long-dated gilt yields could remain elevated due to global geopolitical concerns and U.K. fiscal uncertainty. Two-year gilt yields last trade at 4.388%, while 30-year gilt yields last trade at 5.753%, Tradeweb data show. (miriam.mukuru@wsj.com)
1017 ET - U.S. natural gas futures are returning gains that followed a below-estimate weekly storage injection, while weather-driven demand from the power sector is seen strong over the coming week. "Cooling demand may build into the end of next week--but as shown by yesterday's lackluster response to a bullish EIA surprise, higher gas prices are more likely in the medium term," Eli Rubin of EBW Analytics says in a note. The premium in January 2027 over October 2026 prices gives marketers an incentive to fill regional storage, he says. "This demand for injection could support pricing into the fall--particularly if producers eyeing the same contango shape production to better capture higher realized pricing." Nymex gas for September delivery is off 1.1% at $2.729/mmBtu. (anthony.harrup@wsj.com)
0951 ET - Oil futures turn higher in early U.S. trading and are on track for hefty gains for July, which saw the U.S.-Iran Memorandum of Understanding fall apart and Iran resume attacks on shipping in the Strait of Hormuz. "All things held equal, the market should go a lot higher and led by diesel and gasoline as refinery run rates arejust too low on a lack of crude," Scott Shelton of TP ICAP says in a note. "The reality is that we areback to a very small amount of crudeversus what is needed." WTI is up 2.2% at $85.42 a barrel. September Brent is 1.5% higher at $90.36 ahead of today's expiry, while the October contract gains 1.8% to $88.47.(anthony.harrup@wsj.com)
0854 ET - Treasury yields edge higher, alongside the dollar, as Middle East tensions linger while central banks struggle to curb inflation. WTI crude rises 2%, after falling yesterday. The Bank of Japan holds rates, as expected, while indicating a hike may be upcoming. U.S. employment costs rise 0.9% in 2Q, beating WSJ consensus of 0.8%. The July University of Michigan Consumer Sentiment Index is forecast to increase. The WSJ Dollar Index rises 0.3% as the greenback strengthens 0.5% against the yen. The 10-year yield is at 4.696%, up from yesterday's settle of 4.662%. The two-year rises to 4.283% from 4.227%. (paulo.trevisani@wsj.com; @ptrevisani)
0843 ET - The Bank of England has suggested that the bar to a near-term interest-rate increase is high, Morgan Stanley's Bruna Skarica and Fabio Bassanin say in a note. During Thursday's rate decision, the BOE said that so far there is little evidence of second-order effects of inflation. Nonetheless, the BOE could be pushed to raise rates if energy costs stay elevated for a prolonged period, Skarica and Bassanin say. Markets price in a 28% probability of a BOE rate increase in September, and fully price in the possibility of one quarter-point rate hike by the end of 2026, LSEG data show. (miriam.mukuru@wsj.com)
0841 ET - Bitcoin edges lower amid uncertainty over key U.S. crypto legislation and the Middle East conflict. The Clarity Act, which aims to establish a framework for regulating digital assets, has stalled in the Senate and it's unclear whether the bill will receive a vote before summer recess starts on August 8. Meanwhile, U.S. officials said Hamas and other Palestinian militant groups agreed to disarm but Israel is yet to comment. Investors are also digesting a batch of U.S. tech earnings this week. Apple shares fell after forecasting weaker sales growth while Amazon gained after posting stronger-than-expected revenue. Elsewhere, crypto-hoarding firm Strategy swung to a quarterly loss, citing bitcoin's decline. Bitcoin falls 1.4% to $63,811, according to LSEG. (renae.dyer@wsj.com)
0840 ET - Eurozone inflation remains above target with significant risks ahead, says Iain Simmons at Oxford Economics. Headline inflation rose 0.1 percentage points to 2.9% in July amid high energy prices due to escalation in the Middle East. Since the ceasefire in Iran collapsed, the risk of broader inflation effects has risen substantially, strengthening the case for a rate hike in September, he says. "Inflation remains above target and yesterday's upside GDP surprise suggests that the eurozone economy may be more able to absorb tighter policy more easily than previously thought." Still, the inflation data show a relatively muted reaction to the Middle East escalation, and second-round wage effects are likely to be limited later this year, Simmons says. (don.forbes@wsj.com)
0700 ET - Euro-denominated credit looks favorable, supported by healthy corporate balance sheets, an improving economic outlook in the eurozone and attractive yields, LBBW's Michael Kohler says in a note. Euro-credit spreads have been resilient amid the market turmoil caused by high oil prices, Kohler says. Given the high geopolitical uncertainty, the less volatile euro investment-grade credit looks attractive, he says. (miriam.mukuru@wsj.com)
0548 ET - The cost of euro credit default protection falls as concerns about the Middle East conflict ease and sentiment improves. The U.S. said it had reached a deal with militant groups in the Middle East for the complete disarmament of Hamas and other armed groups in Gaza. The announcement reduces concerns about a broader conflict in the Middle East. Oil prices also fall amid reports of a modest improvement in tanker traffic through the Strait of Hormuz while equities rise as tech stocks recover. The iTraxx Europe Crossover index of euro high-yield credit default swaps falls 5 basis points to 258bps, S&P Global Market Intelligence data show. (miriam.mukuru@wsj.com)
0449 ET - Austrian oil-and-gas company OMV reported a solid print that beats expectations, RBC Capital Markets analyst Adnan Dhanani writes. The strong contribution from Borouge International is encouraging, he adds. Investors will want to know how OMV will continue to capture high refining margins as tensions in the Middle East continue, he adds. Shares fall 0.4% to 63.20 euros. (adam.whittaker@wsj.com)
0352 ET - Oil prices fall in early trading but remain on track for a monthly surge of around 20%. Ship-tracking data point to a modest increase in tanker traffic through the Strait of Hormuz, according to analysts, while Saudi Arabia unveiled plans for a multinational maritime defense coalition aimed at protecting international shipping. Front-month Brent crude is down 1.1% to $88.09 a barrel, while WTI falls 1.4% to $82.42 a barrel. Still, risks remain elevated, with a drone strike at Egypt's Damietta port raising fresh concerns over Suez Canal shipping. "The U.S. and Iran engage in intermittent military exchanges but stop short of a return to high-intensity warfare," BMI analysts say. "This sets the stage for volatile price movements over the coming weeks and months, with a shaky diplomatic track and volatile conditions on the ground driving sudden and extreme shifts in market fundamentals and risk premia." (giulia.petroni@wsj.com)
0344 ET - Yields on U.K. government bonds, or gilts, fall after oil prices turn lower as Middle East tensions ease. The U.S. said it reached a deal with militant groups in the Middle East in which the groups agreed to disarm. The announcement marks progress in discussions between the U.S., Israel, Hamas and Middle East mediators. Analysts also say flows of oil through key chokepoints has shown some improvement. Brent crude price falls 0.9% to $88.2 per barrel. Ten-year gilt yields fall 4 basis points to 4.969%, Tradeweb data show.
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