U.S. futures were mostly lower, while oil rose on continued uncertainty over the re-opening of the Strait of Hormuz and any peace agreement between Iran and the U.S. Over the weekend, Iran said it was close to a deal with Oman to reopen the Strait, but set out a number of terms to the U.S. before that could happen.
On Monday, President Trump said that Iran would need to pay compensation for killing American forces over the decades before any deal could be agreed. "I have instructed my representatives to put this firmly into any, and all, future negotiations," Trump posted to Truth Social.
Treasury yields rose, while gold prices were broadly flat.
--U.S. futures were mostly down in early European trading. The Dow Jones Industrial Average was down 0.1%, and the S&P 500 0.05% lower, while the tech-heavy Nasdaq was up 0.05%. Inflation data Wednesday will be closely watched for any indication for the direction of interest rates.
--European indexes were up in early trading, boosted by energy stocks due to a rise in oil prices on uncertainty over the reopening of the Strait of Hormuz and any Middle East peace deal. The Europe-wide Stoxx 600 was up 0.1%, Germany's DAX rose 0.01% and France's CAC 40 rose 0.04% after all closed at new records Monday. London's FTSE 100 index was up 0.03%, boosted by oil majors BP and Shell, which were up 1.5% and 1.1% respectively.
--Asian equity markets were mixed as investors weighed developments surrounding the U.S.-Iran conflict. President Trump has opted to use economic pressure in hopes of a new outcome in the U.S.-Iran conflict, The Wall Street Journal reported, citing U.S. officials. South Korea's Kospi rose 0.7%, Singapore's FTSE Straits Times Index gained 0.5%, and Taiwan's Taiex was 0.4% higher. China's Shanghai Composite Index ended 0.8% lower.
--Volatility in the euro versus the U.S. dollar is likely to remain low in the near term, ING's Chris Turner says in a note. "It is hard to see that environment changing anytime soon--or at least until mid-September when central bankers around the world return from their summer breaks." The euro is unlikely to trade much outside a range of $1.1515 to $1.1560 Tuesday, he says. The euro fell 0.1% to $1.1533.
--Yields on U.K. government bonds, or gilts, advanced due to inflation concerns as oil prices stay elevated. The lack of a near-term solution to the Middle East conflict drove up oil prices and raised concerns that inflation could force central banks to raise interest rates in the coming months. Ten-year gilt yields climbed 4.4 basis points to 5.024%, the highest level since July 31, Tradeweb data showed.
--Treasury yields rose, while the dollar trades steady as negotiations to reopen the Strait of Hormuz appear to have stalled, lifting oil prices. Markets are pricing an increased chance that the Federal Reserve will raise interest rates in September in response to higher oil prices, with LSEG data showing the probability back above 50% after being scaled back briefly following Friday's weaker-than-expected U.S. nonfarm payrolls report. The 10-year Treasury yield was up 2.3 basis points at 4.721%, Tradeweb data showed. The DXY dollar index was flat at 99.834, with investors cautious ahead of Wednesday's U.S. inflation data.
--The yields on eurozone government bonds were higher due to inflation concerns, as prospects of a near-term resolution to the U.S.-Iran war fade. The U.S. decided to put economic pressure on Iran through financial sanctions and a blockade of Iranian ports in an attempt to force Iran to reach a deal with the U.S. The lack of progress in the U.S.-Iran negotiations is causing inflation fears and pushing up sovereign bond yields. Ten-year Bund yields climbed 2.3 basis points to 3.198%, Tradeweb data show. Ten-year French government bond yields rose 3.4 bps to 4.009%.
--Bitcoin fell as hopes for a reopening of the Strait of Hormuz fade, causing investors to shun risky assets. The impasse lifts oil prices and boosts expectations for interest-rate rises by the Federal Reserve, hitting risk sentiment. The oil-price rally is making markets anxious ahead of Wednesday's U.S. inflation data, Tickmill Group's Patrick Munnelly says in a note. Bitcoin fell 0.3% to $63,933, LSEG data show.
--Oil prices extend the previous session's gains as talks to reopen the crucial Strait of Hormuz waterway hit an impasse. In early European trading, Brent crude was up 2.1% to $89.61 a barrel, while WTI futures rose 2.2% to $83.90 a barrel after settling 5% higher on Monday. "The pattern keeps repeating--initial enthusiasm when negotiations appear promising, only for that optimism to dissipate just as quickly," analysts at ING said. "Yet the oil market remains very headline-driven, which leaves prices whipsawing."
--Gold prices were broadly flat as investors await upcoming U.S. inflation data for more cues on the U.S. interest-rate outlook after weaker-than-expected jobs data led markets to scale back bets for a September hike. In early European trading, futures were flat at $4,417.60 a troy ounce, but remained up more than 6% on the week.
Comments