MARKET WRAPS
Watch For:
EU foreign trade; Germany ZEW indicator of economic sentiment; U.K. unemployment; no major corporate trading updates expected
Opening Call:
European stock futures were mixed early Tuesday. Asian stock benchmarks were largely lower; the dollar and Treasury yields rose; oil futures advanced; while gold was little changed.
Equities:
Stock futures point to a mixed open in European markets on Tuesday as investors assess the outlook for tech stocks after global equities fell Monday on fears that AI spending would be curtailed because of concerns about the safety of the emerging technology.
A slowdown isn't a foregone conclusion. The AI build-out has emerged as one of the U.S. economy's steadfast sources of growth. Much is at stake in keeping it going, even if it all pales in comparison to humanity's potential extinction.
However alarming the warnings might be, few seem to be taking them as a reason to abandon the AI trade. The technology race with China is part of the reason.
"What really happened? Surely something big enough to spook Dario, Sam and Elon into rare agreement," said Giuseppe Sette, co-founder of Reflexivity, an AI investment analytics firm. "With China in the race, though, we don't expect any major slowdown. And as for any retracement in AI stocks, that is simply a buying opportunity."
Forex:
The dollar started the week on a strong note, as markets price in a Fed rate hike this week, said DBS's Philip Wee. "We remain cautious about this pre-FOMC USD rally," Wee said.
DBS expects the release of the updated Summary of Economic Projections and the dot plot to be a market catalyst.
Bonds:
Elevated borrowing costs could be a new normal as a combination of drivers undermine demand for government debt.
"I think a major factor is, basically, a big demand for capital from the AI buildout," Societe Generale's Jan Groen said. "And on top of that, we have a lot of demand from the federal government [and] a lot of uncertainty about the Fed, whether they actually will start hiking."
Groen expects the Fed to start hiking this week and repeat every other meeting through March. Fiscal worries, however, are here to stay. "There is a real risk that fiscal dominance will be an issue for monetary policy going forward," he said.
Energy:
Oil futures climbed early Tuesday. Stabilizers in the global oil market appear to be weakening, with China's crude oil imports edging higher and non-OPEC+ supply outside the Middle East likely to only come online in 2027, said Commonwealth Bank of Australia's Vivek Dhar.
Dhar finds it difficult to predict when oil flows in the Strait of Hormuz will recover materially, given still-elevated U.S.-Iran tensions.
Metals:
Gold remained under pressure in Asia. The precious metal's moves suggest little hope that it will recapture its role as a haven asset any time soon, said David Morrison at Trade Nation.
Investors piled back into the dollar--and out of gold--as a deterioration in the Middle East conflict and tech leaders' doomsday warnings about AI soured risk sentiment. Persistent mine-supply constraints could continue to support copper, said ING. This is despite pressure on prices due to calls from leading technology executives to slow AI development, which could weigh on the data-center investment outlook, ING added. Copper is typically used in data centers for electrical applications. Iron ore futures fell in Asian trading. Demand remains weak in China, while supplies are still high, Baocheng Futures said. This is leading to a weak fundamental outlook for iron ore and is expected to continue weighing on prices.
TODAY'S TOP HEADLINES
AI Leaders Are Calling for a Slowdown, but Wall Street Keeps on Buying
Wall Street's AI train is still steaming ahead, even after the technology's leaders called for a slowdown.
A week of alarming headlines about AI's potential to destroy civilization culminated Saturday with Anthropic's Dario Amodei, OpenAI's Sam Altman, Elon Musk of xAI and Demis Hassabis of Google's DeepMind each affirming the need to curb development of the technology.
Wall Street Confronts Prospect of a New Era After Treasury Yield Hits 5%
The last time the yield on the 10-year Treasury note rose above 5%, the U.S. economy was dealing with pandemic aftershocks. This time, the main culprit is a war with no clear end in sight.
Escalating fears over energy prices and inflation drove the 10-year yield above 5% Monday, a pivotal milestone that is forcing investors to confront whether the bond market is entering a new era.
Oil Executives Say the Great Fuel Crisis Is Here
American oil executives warned for months that the prolonged closure of the Strait of Hormuz was bound to cause a fuel crisis. Now, they say it is here.
Commercial fuel stocks around the world have been depleting for more than six months, and strategic crude reserves can't be tapped much further. Attacks last week shut down a crucial crude pipeline in Saudi Arabia that bypassed the Strait, stranding at least 2.5 million barrels a day from an already tight global oil market, analysts estimate.
Saudi Arabia may be just days away from not being able to export much oil
Saudi Arabia, a top oil exporter to the world, may be days away from not being able to export much crude, intensifying pressure on global energy markets with the northern hemisphere's winter and harvest season just around the corner.
The kingdom said on Friday that it shut down its East-West pipeline, which had emerged as a crucial conduit to sidestep the Strait of Hormuz chokepoint, itself severely curtailed with the U.S. and Israel's war with Iran. Saudi Arabia has not yet offered a timeline for repairs, which could be lengthy.
Novo Nordisk Is Dropping Some Weight. Can a Rebrand Save the Stock?
Novo Nordisk is slimming down-and by shortening its brand name, the Danish drugmaker is signaling a new chapter as it aims to be more than a heavyweight in the market for GLP-1 medications.
The company announced Monday that it will now go by Novo, although its legal name remains Novo Nordisk. Rebranding to the shorthand long used by analysts and investors gives the Danish drugmaker a distinct, consistent identity to connect with stakeholders, the company said.
Microsoft Sets Limits for AI Models as Altman Details Control Risks
Microsoft has published a provisional code of conduct that it aims to apply when training new artificial-intelligence models, the latest company to discuss limits on advanced AI systems as OpenAI's chief executive warned companies risk losing control of their AI systems.
Mustafa Suleyman, the CEO of Microsoft AI, told CNBC Monday that the company had been working for months on the new guidance, which includes principles it describes as "humanist AI," but chose to publish it now given the current debate around AI.
Amazon, Netflix, YouTube Form Coalition to Advocate for Consumer Choice in Online Content
Amazon, Netflix, and Google unit YouTube are joining forces to advocate for consumer access to online content.
The three companies are founding members of a new Streaming Access and Choice Alliance led by TechNet, an advocacy network of technology CEOs and executives.
Write to singaporeeditors@dowjones.com
Expected Major Events for Tuesday 06:00/GER: Aug WPI
06:00/ROM: Jul Industrial production
06:00/NOR: Aug External trade in goods
06:00/UK: Aug UK monthly unemployment figures
06:45/FRA: Aug CPI
07:00/SPN: Aug CPI
07:00/SVK: Aug CPI
07:00/SVK: Aug Core & net inflation development
08:00/POL: Jul Merchandise trade
08:00/POL: Aug CPI
08:00/BUL: Aug CPI
08:00/ITA: Jul Foreign Trade EU
09:00/EU: Jul Foreign trade
09:00/CRO: Aug CPI
09:05/GER: Sep ZEW Indicator of Economic Sentiment
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