MARKET WRAPS
Stocks:
European shares were struggling for direction Monday while oil extended gains in early trading after the U.S. and Iran exchanged a series of fresh strikes over the weekend.
Brent crude topped $97 a barrel as both the U.S. and Iran ramped up efforts to assert control over the crucial Strait of Hormuz. In response to the Islamic Revolutionary Guard Corps attack on American ships, the U.S. military struck three Iranian oil tankers.
"With tanker traffic increasingly exposed to direct military action and restrictions around the strait potentially widening, risks to Gulf energy exports remain elevated, keeping a substantial geopolitical premium embedded in oil prices," MUFG said.
Looking ahead, the European Central Bank interest-rate decision is the week's key event in the eurozone, where a 25-basis-point rate hike is widely expected and fully priced by markets, according to LSEG data.
"Even though hiking by 25 basis points seems a given, we think the balance of risk is towards a dovish market reaction," ING said. "Markets are already pricing in a landing zone of around 3%, which we deem on the hawkish side."
According to LBBW, the intriguing question ahead of the ECB's policy decision on Thursday is whether the central bankers will add fuel to the fire or dampen speculation about rate hikes somewhat.
U.S. Markets:
U.S. stock futures were mixed Monday and Treasurys didn't trade, as U.S. investors break for Labor Day.
Investors will be watching for consumer-price inflation data for August due later this week following a much stronger-than-expected U.S. jobs data for the same month.
Forex:
The dollar edged lower, shrugging off rising oil prices.
Bonds:
Eurozone government bond yields rose in early trade as oil prices increased and investors focused on the ECB's interest-rate decision on Thursday.
Going into 2027, eurozone bond curves are expected to resume steepening, encouraging debt management offices to continue gradually reducing weighted average maturity, Morgan Stanley said.
Jefferies has stayed away from long-end bonds since July, as it did not see an easy way out of the U.S.-Iran war. Positioning is, however, the one factor that is supportive of rates, as it is at stretched levels, according to Jefferies' indicators.
Energy:
In early European trading, Brent crude was up 0.8% and WTI rose 0.6%.
Gas
European natural-gas prices climbed more than 2% as supply flows from Qatar remained severely disrupted.
Metals:
Gold prices fell after surprisingly strong U.S. jobs data and renewed Middle East tensions reinforced expectations that the Federal Reserve could raise rates next week.
"Gold has remained volatile around $4,400 after recovering from July lows near $4,000 an ounce," MUFG said.
Copper
Copper prices rose in early European trading despite growing expectations that the Fed will raise interest rates this month, weighing on the demand outlook for metals.
Iron ore
Iron ore prices were higher in early Asia trade, thanks to a temporary decline in port arrivals, pre-holiday restocking by steel mills and elevated freight costs, said Huatai Futures.
EMEA HEADLINES
Novartis Shares Fall After Heart Drug Misses Target in Late-Stage Trial
Novartis shares fell after the Swiss drugmaker said an experimental medicine failed to reduce cardiovascular risk in a late-stage clinical trial.
Shares in Novartis were down 3.2% in European morning trading Monday, reducing year-to-date gains to 14%.
German Industrial Production Contracts on Auto Sector Slowdown
Industrial production in Germany unexpectedly shrank in July, driven by sharply lower activity in the country's troubled auto sector.
Output fell 1.1% on month after a flat reading in June, the country's statistics agency Destatis said Monday. That marked the strongest decline since August last year. Economists polled last week by The Wall Street Journal had expected a 0.1% rise.
Trump Envoys Visit Ukraine in New Push for Peace Talks
President Trump's envoys achieved one thing with their first trip to Ukraine's capital on Sunday as they tried to jump-start peace talks between Russia and Ukraine: a brief pause in Russia's deadly bombing campaign against Kyiv.
Ukraine and Russia held off on strikes on each other's capitals as the U.S. envoys, Jared Kushner and Steve Witkoff, visited first Moscow then Kyiv this weekend.
How Ukrainian Drone Strikes Are Pounding Russia's Economy
Ukraine's long-range drone strikes are inflicting pain on some of the most strategic sectors of the Russian economy. The costs are adding up.
By pounding refineries, shipping terminals and e-commerce warehouses, Ukraine is using economic pressure to weaken its larger foe and push Moscow to end the conflict. Russian President Vladimir Putin has declared that the strikes won't change his military aims, and Russia has hit back with its own ruthless drone strikes.
GLOBAL NEWS
OPEC, Allies Agree to Keep Oil Output Steady in October
Key members of the Organization of the Petroleum Exporting Countries and its allies agreed to hold oil production steady in October after six straight monthly increases, as the focus shifts to setting output quotas for next year.
Sunday's decision comes as the war between the U.S. and Iran continues to severely disrupt global oil flows, limiting the ability of the broader group, OPEC+, to bring additional barrels to consumers and influence market balances.
German Industrial Production Contracts on Auto Sector Slowdown
Industrial production in Germany unexpectedly shrank in July, driven by sharply lower activity in the country's troubled auto sector.
Output fell 1.1% on month after a flat reading in June, the country's statistics agency Destatis said Monday. That marked the strongest decline since August last year. Economists polled last week by The Wall Street Journal had expected a 0.1% rise.
U.S. Strikes Three Iranian Ships After Missiles Fired at American Aircraft Carrier
The U.S. military said it struck three Iranian oil tankers on Saturday after Iran launched ballistic missiles toward two Navy warships, including an aircraft carrier, as the fight to assert control over the Strait of Hormuz intensifies.
"A U.S. aircraft carrier and guided-missile destroyer successfully evaded multiple unprovoked Iranian attacks," said U.S. Central Command, which oversees American forces in the Middle East.
Canadians Double Down on U.S. Boycotts Over Tariffs and Trump's 'Lake America'
President Donald Trump's steep tariffs and latest verbal attacks on Canada have spurred Canadians to double down on their ongoing boycott of all things U.S.A.
On top of Trump's claims that Canadians have been "ripping off" the U.S., Trump has repeatedly insulted America's biggest trading partner as "the 51st state." His executive order last month changing Lake Ontario's name to "Lake America" ignited a fresh round of Canadian ire.
After Far-Right Election Breakthrough, Germany's Merz Faces Painful Dilemma
BERLIN-Germany's Alternative for Germany scored a historic victory at a regional election on Sunday but was just short of the majority needed to form the country's first far-right government since World War II, according to preliminary results.
The result will present other parties on the right and the left with a stark choice: continue banding together to keep the AfD out of power despite deep political differences-a decades-old strategy known as the firewall-or let the AfD form a minority government for the first time.
Amazon Cargo Plane Overshoots Runway in Miami, Killing Five People
An Amazon.com cargo plane overshot the runway at Miami International Airport and crashed into nearby vehicles, killing at least five people and injuring five more.
The plane swiped several vehicles and trapped people inside who had to be extricated, Miami-Dade Fire Rescue Chief Raied "Ray" Jadallah said at a news briefing Sunday afternoon. Of the five injured, three were in critical condition, authorities said.
Write to priscila.barrera@wsj.com
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