Futures Erase Overnight Gains As Oil Hits One-Week High, Yen Slides

US equity futures start the new week barely higher, having erased almost all of their overnight gains, yet still trading at all time highs, led by Tech with small caps starting the week in the red. As of 8:00am ET, S&P futures are fractionally in the green as traders look to the next big data print from the US this week in the form of CPI and PPI updates, as bets on September rate hikes tumbled after Friday’s jobs debacle; Nasdaq futures rise 0.1%. In premarket trading, both Mag7 and Semis are higher with weakness in Memory, Software, and South Korea despite the rise in KOSPI overnight. Cyclicals are outpacing Defensives, including participation from Energy / Cmdtys names. Europe’s Stoxx 600 is coming off its best daily streak of gains since June and more money managers say that this European equities rally could be durable. In Asia, Japan’s Nikkei 225 rose 2% and the Kospi was flat, lagging a 6% surge for the small-cap Kosdaq as it benefits from a rotation out of memory stocks and leveraged ETFs. Overnight, JPMorgan raised its year-end S&P target to 8000 as the bank sees earnings delivering $365/shr this year and $420/shr in FY27, +15% YoY.  Bond yields are flat to +1bp as the yield curve twists flatter; USD trading higher following consecutive weekly declines. USDJPY rises 0.6% toward 159, surpassing last week’s intraday high and more than erasing the drop we saw on Friday after the soft US jobs report prompted a broad dollar selloff; about half of the post-intervention move has now been erased. Commodities are led higher by Energy with MidEast headlines driving direction; Brent trades at session highs, just under $85/bbl and the highest since Aug 3, as Iran and Oman are still short of a final deal to reopen the Strait of Hormuz while Iran ruled out direct talks with the US for now. Tehran promoted a hard-line ex-commander as its top security official. President Trump said the US was “semi-negotiating” with Iran. Israel has rejected a proposal by US-backed mediators for disarming Hamas. Houthis are targeting Saudi refineries after SA, Pakistan, and Turkey signed a new defense pact. Both Base and precious metals are mixed with silver the standout, rallying with the AI theme. There are no major econ releases today as the market preps for CPI and Retail Sales, our Scenario Analysis is included. With earnings season almost completed, we are seeing the SPX trend towards 15% rev growth, 50% EPS growth, and almost 17% margins. 

In premarket trading, Mag 7 stocks are mostly higher even as Apple falls 1.1% as Jefferies downgrades to underperform noting that the roadmap to a higher-priced iPhone looks challenging. Meta Platforms (META) climbs 2.6% after introducing a new AI model called Muse Glimmer that can run on a single computer, allowing users to download and customize the technology (Alphabet +0.8%, Tesla +0.4%, Nvidia +0.2%, Amazon +0.7%, Microsoft -0.09%).

• Aaon (AAON) climbs 8% after the heating, ventilation, and air conditioning company reported adjusted earnings per share for the second quarter that beat the average analyst estimate.
• AbCellera (ABCL) climbs 22% after saying a clinical trial evaluating ABCL635 met the primary efficacy endpoints
• Barrick Mining’s US-listed shares (B) slip 4% after the company reached an agreement with Newmont Corp. on their Nevada joint venture, opening the way for Barrick to list its North American assets in New York.
• HP Enterprise (HPE) rises 6% after Morgan Stanley upgraded its rating on the stock to overweight. Morgan Stanley is more favorable on the IT hardware industry overall due to heavy spending on AI-related infrastructure.
• MarineMax (HZO) shares are halted after Safe Harbor Marinas, a Blackstone portfolio company, agreed to acquire the company for or $53.00 per share in an all-cash deal.
• Monday.com (MNDY) falls 9% after the application software company posted second quarter results and providing guidance.
• National Energy Services Reunited Corp. (NESR) rises 10% after the company reported a 59% year-over-year increase in its revenue.
• Sionna Therapeutics (SION) tumbles 91% after the biopharmaceutical company said a proof-of-concept trial did not achieve key activity endpoint.
• Tenax Therapeutics (TENX) sinks 84% after the development stage biotechnology company said a trial failed to meet its primary endpoint.
• Varex Imaging (VREX) soars 48% as Teledyne Technologies agreed to buy the company for $18.90 per share.

In other corporate news, Berkshire Hathaway spent about $4.5 billion to buy back its own shares in 2Q and purchased nearly $20 billion of equities in the period. The stock buybacks provided shareholders with their largest quarterly payout since 2021. TSMC reported a 45% rise in its monthly sales, a sign of sustained demand for AI hardware in the face of market volatility. Apple has been testing memory chips from China’s CXMT, as the iPhone maker addresses a memory crunch during the AI boom, according to the WSJ. Paramount Skydance has agreed to sign contracts with major theater chains guaranteeing that it will release 30 movies a year in cinemas if it acquires Warner Bros. Discovery.

Stock futures are set for a modest extension of Friday’s gains, which saw US stocks close at all time highs, with a rate hike looking less likely to happen anytime soon after Friday’s dismal jobs report, and strong monthly numbers from TSMC helping the AI narrative. A stellar earnings season is in its final stretch, prompting strategists at JPMorgan to boost their year-end target for the S&P 500 to 8000.The team led by Dubravko Lakos-Bujas cited stronger cloud growth and increased backlogs at Alphabet Inc., Amazon.com Inc. and Microsoft Corp. that should reduce worries over return on their invested capital.

“As elevated backlogs convert into recognized revenue, cloud growth should remain well supported, helping validate rising AI capex,” they said. “Across hyperscalers, demand indicators remain high and rising.”

Strategists at banks including Citigroup Inc., Deutsche Bank AG and Goldman Sachs Group Inc. are also among the most bullish voices on US stocks this year. On average, the S&P 500 is seen rising to 7,845 points by the year end, about 1% above current levels

As Bloomberg notes, there are fewer big market catalysts this week, though everyone will be closely looking at this week’s CPI and PPI prints now that inflation is effectively the only thing the Fed is looking at to decide if to hike rates. Investors will also look for further clues on the AI trade — and on the debate around chip valuations — when Applied Materials, Lumentum and Cisco report in the coming days. Sandisk hosts an investor day on Thursday. Further out, Nvidia numbers and the Fed’s Jackson Hole conference are expected to provide some market volatility, if options signals are anything to go by.

“With earnings largely in the rear-view mirror, geopolitics — and particularly Iran’s impact on oil prices and inflation expectations — should move back to the forefront,” said Fabio Caldato, portfolio manager at AcomeA Sgr. “We are focused on Wednesday’s US CPI print as a key test of the ongoing disinflationary process.”

The S&P is tracking for earnings growth of almost 32% in the second quarter, nearly four times the average earnings growth rate outside of the coronavirus pandemic period since the fourth quarter of 2013, according to Bloomberg Intelligence, although much of that is from equity gains on investment. However, there’s more to the story than AI, with eight of the eleven GICS sectors poised for double-digit EPS growth in 2Q, led by energy (up 133%), technology (up 68%) and materials (up 41%).

In other assets, oil held onto gains from the end of last week as Iran and Oman remained short of a deal to reopen the Strait of Hormuz. Trump signaled he’s prepared to let economic pressure on Iran build rather than launch fresh military strikes, marking a shift from his repeated threats to escalate the bombing campaign. Israel’s Netanyahu, meanwhile, hardened his position and rejected a proposal by US-backed mediators for disarming Hamas.

An agreement with Oman to establish a shipping route through Hormuz was “very close,” Iran’s Foreign Minister Abbas Araghchi said over the weekend. He ruled out direct talks with the US for now because of violations of an interim peace deal reached in June.

Elsewhere, US large cap equity positioning has jumped from near neutral to now clearly overweight, with large-cap tech particularly elevated, though still below last year’s highs, according to Deutsche Bank strategists. A broadening in EPS growth and upward revisions pushes Morgan Stanley strategists to favor quality stocks as well as AI adopters.

Over the weekend, China’s factory-gate inflation eased for the first time since the start of the Iran war and consumer prices decelerated too, suggesting cost pressures sparked by the jump in oil prices are starting to fade and the threat of deflation returning is once again front and center. Economic growth in the euro-area is expected to be firmer after a resilient second quarter, according to a Bloomberg survey of analysts. Rate-hike expectations for the Swiss National Bank have been pushed back.

European stocks are little changed as the Stoxx 600 comes off its best daily streak of gains since June and more money managers say that this European equities rally could be durable. Technology shares leading the gains, boosted by strength in semiconductors. Media and telecom stocks are underperforming. Here are the biggest movers:

• Aumovio shares rose as much as 6.2% after Bernstein upgraded the stock to outperform from market-perform, saying the German auto parts maker’s valuation “leaves substantial upside and limited downside.”
• Plus500 shares rose as much as 7.1%, with analysts positive on the trading platform operator’s 1H results and shareholder returns program. Some of the numbers were already reported in a trading update last month
• Elmos shares rose as much as 7.8%, broadly in line with the European semiconductor sector, after Oddo BHF raised its recommendation to outperform from neutral
• Legal & General shares fell as much as 2.4%, the most in a month, after Citi cut its recommendation on the UK asset manager to sell from neutral
• Amundi dropped as much as 2.9%, the most in two months, after Deutsche Bank downgraded the stock to hold from buy
• Pharos Energy shares dropped as much as 6.9%, retreating from a six-year high, after Serica Energy said it’s takeover offer is “final and will not be increased” after being narrowly outbid by Ratio Petroleum last week.
• Aryzta fell as much as 14% to trade at the lowest since January 2023, after weak market conditions in Germany weighed on the Swiss baker’s profitability in the first half of the year

Earlier in the session, Asian stocks rose, with the technology sector the top contributor to gains, after softer-than-expected US jobs data eased pressure on the Federal Reserve to raise interest rates. The MSCI Asia Pacific Index rose 0.6%, tracking an advance in US equities on Friday that drove the S&P 500 to an all-time high. Shares of Japan’s Recruit Holdings jumped by the most since its 2014 IPO to a record, after the owner of the Indeed job-search portal reported profit that beat estimates and raised its outlook. Taiwan’s Delta Electronics and TSMC were among the other big boosts to the Asia benchmark, with both firms posting a more than 40% jump in July sales. Japan’s Nikkei was the top gainer in the region, while equities in India and several Southeast Asian markets underperformed as oil prices extended gains. Iran and Oman remained short of a deal to reopen the Strait of Hormuz, while Houthi militants claimed an attack on a Saudi refinery near the Red Sea. In Indonesia, the Jakarta Composite Index reversed early gains that had put the benchmark on course for a bull market. Meanwhile, President Prabowo Subianto nominated Destry Damayanti as the sole candidate to head the nation’s central bank.

“Asian markets are taking their cue from Wall Street, where a surprisingly weak US jobs report has taken some of the heat off the Fed ahead of September,” said Josh Gilbert, lead analyst for Asia Pacific and the Middle East at eToro. “The test now is this week’s US inflation print,” with the picture challenged by higher oil prices due to the Iran war, he added.

In FX, the Bloomberg Dollar Spot Index is up 0.1%. The yen is the worst performer among G-10 currencies against a marginally stronger dollar. USD/JPY rises 0.6% toward 159, surpassing last week’s intraday high and more than erasing the drop we saw on Friday after the soft US jobs report prompted a broad dollar selloff.  The Bank of Japan flagged the risk of inflation heating up in the summary of views from its July meeting, with one board member noting the possibility of a faster pace of rate hikes.

In rates, treasuries are slightly weaker as the US trading day begins — with yields higher by 1bp-2bp and the curve flatter — as oil prices climb for a third straight day amid absence of an agreement to reopen the Strait of Hormuz. Yields remain inside Friday’s ranges, when rally sparked by soft July employment data faded over the course of the session as oil prices rose. US 10Y yields trade up to 4.67%, up 2bps. First Treasury coupon auction cycle of the August-to-October financing begins Tuesday with $58b 3-year note sale; 10- and 30-year new issue auctions follow over next two days US session has few calendar events, with quarterly new-issue auctions ahead this week along with July CPI report Wednesday.  IG credit new-issue calendar is expected to revive with $40 billion anticipated for the week, about half last week’s total, concentrated on Monday and Tuesday ahead of the major economic releases. JGB yields are higher with Treasury yields.

In commodities, Brent crude futures rise 1% to around $84.40 a barrel as Iran and Oman remained short of a deal to reopen the Strait of Hormuz while Iran ruled out direct talks with the US for now. WTI crude oil futures are up about 1.4% and highest in nearly a week. Tehran promoted a hard-line ex-commander as its top security official. President Trump said the US was “semi-negotiating” with Iran, according to an Axios report. Israel has rejected a proposal by US-backed mediators for disarming Hamas. Precious metal advance, with spot silver up 1%.

Today’s US economic data calendar is blank for Monday; also ahead this week are July PPI and retail sales, and August preliminary University of Michigan sentiment. Fed speaker slate includes Cleveland Fed’s Hammack, unscripted on Yahoo Finance ( 3pm); later this week, Hammack and Richmond Fed’s Barkin have appearances slated Thursday.

Market Snapshot

Top Overnight News

• President Donald Trump signaled he’s prepared to let economic pressure on Iran build rather than launch fresh military strikes, saying the US was only “semi-negotiating” with Tehran on the Strait of Hormuz: BBG
• Iran ties Hormuz reopening to US concessions on several demands: RTRS
• Intel said it will be offering $15 billion in common stock, taking advantage of renewed interest in its business prospects during the artificial intelligence data center boom.
• Lenders scrutinize US data center financing as community opposition builds: RTRS
• Meta launches new AI model as Zuckerberg champions open-weight push: RTRS
• China Unleashes $28 Trillion Markets to Catch US in AI: BBG
• Stocks held near record highs with traders looking to the next big data print from the US as bets on Federal Reserve interest-rate hikes eased. Oil climbed to $84 a barrel as a deal to reopen the Strait of Hormuz remained elusive: BBG
• Boeing agreed to take a minority stake in Archer Aviation in a deal that hands over control of its flying-taxi venture Wisk Aero: WSJ
• Economic growth in the euro zone is set to quicken after showing surprising resilience to the Iran war, according to a Bloomberg survey of analysts: BBG
• Poland and Baltics shield infrastructure, fearing a Russian false-flag strike: RTRS
• Ukraine kills 13 in drone attack on Russian city of Nizhnekamsk, officials say: RTRS
• Millions of burnt books show how ‘war of endurance’ is hurting Ukraine: AP
• GameStop’s Cohen Is Said to Weigh Pulling $56 Billion EBay Offer: BBG
• Wall Street traders and strategists say US Treasury Secretary Scott Bessent is sending fresh signals that he’s eager to keep bond yields from spiking higher: BBG
• Behind Bessent Moves, Wall Street Sees a Bond-Market Angst: BBG
• In rural Wisconsin, frustrations over Trump ag policies heat up House race: RTRS
• Swiss National Bank forecasters pushed back predictions for an interest-rate increase, with no move anticipated before next June at the earliest: BBG

Iran war

• Iran’s Foreign Ministry spokesperson said talks with Oman are constructive and positive, saying Tehran did not address the issue of fees in the discussions with Oman regarding the Strait of Hormuz, but it is natural to collect fees for services received. He added that Iran is currently focused on the Strait of Hormuz rather than resuming negotiations with the US. Furthermore, Baghaei said Iran has demanded compensation for damage caused by the US-Israel war, while the Strait of Hormuz could reopen if no third party interferes.
• The Iranian parliament’s National Security and Foreign Policy Committee on Sunday approved the general outlines of a bill to manage the Strait of Hormuz, according to ISNA.
• US President Trump told Axios that they are only semi-negotiating with Iran and are just watching Iran with its huge inflation, while he stressed that Iran is in very bad shape economically and has no money to pay its troops, with the US naval blockade exacerbating the Iranian regime’s economic crisis. However, he said it will work out and that it always works out, as well as compared it to a chess game regarding the back-and-forth with Iran.
• US Vice President JD Vance said the US is in the middle of a game in the Iran conflict.
• Iranian President Pezeshkian said now is the best time for an agreement because Iran is strong, united and seen as victorious in war. Pezeshkian separately commented on Friday that they will not yield to force, but are not seeking war or aggression either, while he added there will be no reason for the tension to continue if the pressure and threats against Iran stop. Furthermore, he said there was no gap between the government and the armed forces, as well as noted that Iran had solved many problems with its neighbours and relations had improved significantly.
• Iranian Foreign Minister Araghchi said Iran and the US are not engaged in talks, and Tehran will not allow them to start as long as Washington breaches the interim deal signed in June.
• Iran said it is very close to a deal with Oman regarding a new maritime transit route in the Strait of Hormuz, but it renewed a list of demands for the US to agree to before the waterway could open. It was separately reported that Iran warned it will not reopen the Strait of Hormuz unless the US meets a series of conditions, including paying compensation for war damage, according to FT.
• Iran’s Supreme National Security Council issued six demands to the US, including total force withdrawal, end to proxy warfare, financial reparations, sanctions and asset relief, lifting the blockade and cessation of rhetoric.
• The wait for the Iran-Oman deal regarding the Strait of Hormuz dragged on, with Iran warning the US that any pact wouldn’t lead to an immediate reopening of the key waterway.
• UKMTO reported that a vessel near Oman was struck by an unknown projectile, which caused a fire on board but has been extinguished.
• Saudi Arabia put out a fire at its Jazan plant early on Sunday, while Yemen’s Houthis claimed responsibility for the attack on the refinery. It was separately reported that Houthis resumed attacking Yemen’s Mocha port using ballistic missiles and drones, with the attacks aimed at Saudi troop concentrations and weapon depots in the region.
• Israel again targeted Alia Al-Tahir Hill in the Al-Nabatiyeh a governorate in southern Lebanon with artillery fire, according to IRNA
• Israeli PM Netanyahu said Israel does not accept a US-backed 15-point plan for Gaza, under which Hamas would disarm in exchange for a phased Israeli withdrawal from the Palestinian enclave, according to FT.
• US official said the White House is not bothered by Israeli PM Netanyahu’s statement on Gaza plan and sees it as part of election season in Israel, according to Axios

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were somewhat mixed, but with most major indices in the green, following last Friday’s gains on Wall Street, where weak jobs data unwound Fed rate hike bets, while oil prices gained in the absence of a formal Strait of Hormuz deal, and participants also digested soft Chinese inflation data. ASX 200 was lower amid declines in the top-weighted financial sector following earnings from Westpac, while participants also look ahead to tomorrow’s RBA rate decision, with the central bank widely expected to keep rates on hold, but continue to echo a hawkish tone. Nikkei 225 rallied as participants digested the recent slew of earnings, with the top gainers in the index driven by their quarterly earnings results. KOSPI traded higher but with upside capped amid the somewhat choppy price action in tech heavyweights and as participants also reflect on earnings releases. Hang Seng and Shanghai Comp were in the green, albeit with gains in the mainland contained following softer-than-expected CPI and PPI data over the weekend. Nonetheless, the data is seen to keep prospects of a rate cut in H2 on the table, while the PBoC said on Sunday that it will continue to implement a moderately loose monetary policy in H2, strengthen counter-cyclical adjustment, and take solid steps to promote sustained and improved economic development.a

Top Asian News

• Chinese CPI MM (Jul) -0.1% vs. Exp. 0.2% (Prev. -0.3%).
• Chinese CPI YY (Jul) 0.5% vs. Exp. 0.8% (Prev. 1.0%).
• Chinese PPI YY (Jul) 3.5% vs. Exp. 3.8% (Prev. 4.1%).
• Japanese Eco Watchers Survey Current (Jul) 45.7 vs. Exp. 44.4 (Prev. 44.0).
• Japanese Economy Watchers Survey Outlook (Jul) 45.8 (Prev. 45.7).

European bourses begin the week relatively muted, on a quiet earnings and data docket. No major geopolitical updates over the weekend either; Iran’s Supreme National Security Council issued six demands to the US, including total force withdrawal and ending proxy warfare. More recently, the Iranian Foreign Minister Baghaei said they are currently focused on the Strait of Hormuz rather than resuming negotiations with the US. Sectors tilt negatively. Tech tops the sector pile, helped by TSMC’s July revenue figures (+44.7% Y/Y). Following another strong month of sales, analysts are now estimating a 46.8% revenue increase for Q3, proving that demand for AI hardware remains firm. Other sector gainers include Basic Resources and Energy. On the other side, Media is the sector laggard, with Food, Beverages &  Tobacco and Retail rounding out the sector underperformers. 

Top European News

• Germany Economy Minister Reiche warned that rising support for the far-right AfD could undermine the government’s efforts to attract foreign investors, as it seeks at least EUR 3.75tln in private capital by 2040, according to FT.

Fx

• Mixed performance across G10s, JPY leading declines while the GBP is the gainer alongside the Antipodeans.
• USD overnight attempted to claw back NFP losses, peaking at 99.70, though the modest rally (as much as +0.2%) came under pressure since the EU open, with the DXY returning back to unch. around 99.60. Focus this week will overwhelmingly be on the CPI print, especially since FT sources last week suggested Warsh was focused on the inflation side of the mandate heading into the September meeting. On that note, market bets for tightening remain trimmed vs. Friday, with the OIS curve implying ~22% probability of a hike, around half of that seen pre-data. Today’s calendar is light, though remarks are expected from hawk Hammack.
• A continued UK narrative of “no news is good news” with UK Parliament on recess and PM Burnham trickle-feeding incremental cost-of-living policies. GBP carry remains attractive, and, combined with technicals, a strong REC/KPMG jobs number is helping Cable today, which recently lifted above 1.35, with EUR/GBP supported just above 0.8560 – EZ drivers light with a strong Sentix survey not sparking a reaction. EUR incrementally firmer against most CEE, with the week’s calendar highlighted by Polish/Turkish/Czech inflation.
• JPY is the clear underperformer, USD/JPY around 30 pips higher than the US payrolls release. Pressure which lacks a clear driver, with BoJ’s summary of opinions hawkish leaning “could be considered that the pace of policy interest rate hikes will have to be faster than market expectations”. However, MUFG writes retail short USD/JPY positions have “probably” been liquidated. Participants are now potentially turning to a carry strategy, which could be seen as more attractive than chasing the pair lower at these levels. USD/JPY looks towards 159.00, currently 20-30 pips off that mark.

Fixed Income

• A contained start to the session for fixed income. With specifics for the space very light, the docket ahead is particularly thin, though it does pick up later in the week with US inflation prints, and as geopolitical uncertainty continues in what is beginning to feel somewhat like summer markets.
• USTs are flat in a thin sub-10 tick range. The docket ahead is very light, aside from Fed’s Hammack (2026, Hawk) who speaks to Yahoo. More generally, we await an update on the geopolitical front (see Commodities for details). Thereafter, the week is headlined by CPI, which draws focus after recent Fed commentary and particularly last week’s FT source reports, which placed the focus even more on near-term inflation prints; a point also exacerbated after the weak NFP report last week, which pared end-2026 hiking expectations.
• Bunds also flat, but have meandered through a c. 30 tick range, but yet to deviate lastingly from the 125.00 region. No move to the morning’s EZ Sentix for August, which printed much better than expected, driven by the current-conditions index, while the expectations component only increased marginally. More generally, the index shows that “Globally, the signs continue to point to a boom”, with all regions ex-Japan improving in August.
• Gilts opened with gains of just a few ticks, before pairing and moving to unchanged in-fitting with peers. As above, UK specifics are very light, aside from the usual political reporting around PM Burnham and potential smaller measures he may take in the weeks and months ahead, with specific reference to the cost of living. Currently, the benchmark is flat in 87.34-62 confines, well within Friday’s 87.09-80 band.

Commodities

• WTI Sept and Brent Oct futures hold a mild positive bias as US-Iran geopolitics remain uncertain, although gains remain capped as no direct military firings or airstrikes were exchanged between the US and Iranian forces over the weekend. To briefly recap, the US, Iran, and Oman are negotiating a temporary plan to partially reopen the Strait of Hormuz, but Iran says no immediate reopening is guaranteed. Iran is demanding major concessions, while disputes remain over banning US/Israeli ships and imposing transit fees under an Oman-Iran traffic-management deal. WTI resides in a USD 77.79-79.42/bbl range (vs Friday’s 76.53-78.77/bbl parameter). Brent trades within a USD 83.33-84.97/bbl range (vs Friday’s USD 81.50-84.44/bbl range).
• Dutch TTF has posted larger gains as the Middle Eastern concern is compounded by EU gas storage levels entering August at a historically low 55% capacity. Dutch TTF trades up almost 4% at the time of writing, north of EUR 57.50/MWh.
• Metals are firmer in continuation of Friday’s NFP-driven upside and amidst relatively stable oil prices and a lack of fresh geopolitics. Spot gold resides in a narrow USD 4,313-4,362/oz range, within Friday’s USD 4,230-4,372/oz range. 3M LME copper holds above USD 14k/t in a USD 14,033.98- 14,161.93/t, with little impact seen from the weekend’s soft Chinese inflation report.
• Kazakhstan is considering using the BTC and Baku-Supsa pipelines and the Trans-Caspian route via Azerbaijan, for oil exports amid disruptions to the CPC, according to IFX.
• UAE’s ADNOC Gas is planning to invest over USD 8bln as part of its expansion push, according to the WSJ.
• Hungarian PM said rising Danube water levels have allowed Paks nuclear power plant to begin reverting one turbine to its original state.
• Ukraine’s Agriculture Ministry said export disruptions could create a grain storage capacity shortfall of around 11mln T this autumn.
• UK regulators are readying a framework for tokenised gold as part of plans to encourage digitalisation of financial markets and safeguard London’s dominance in global bullion trading, according to FT

Central Banks

• BoJ Summary of Opinions from the July meeting stated that a member said Middle East Development, expanding AI-related demand and weak yen all work towards pushing up inflation, while a member said consumer goods inflation is expected to pick up again towards autumn. Furthermore, a member said policymakers should stay alert to upside inflation risks from a weak yen and strong AI-related demand, while there was also the opinion that inflation risks are skewed sharply upward as higher oil costs feed into consumer prices, and global AI demand and Japan’s expansionary fiscal policy support demand.

Geopolitics

• Russia struck two oil refineries in Ukraine’s northeastern Sumy region, according to Interfax. It was separately reported that Ukraine’s Odesa port sustained damage from a Russian attack, while Russian authorities said five were killed in a Ukrainian drone attack on Belgorod.
• US President Trump’s special envoy Steve Witkoff and Kushner may visit Kyiv and Moscow within the next 7-10 days, according to TASS.

US Event Calendar

• 3:00 pm: Fed’s Hammack Appears on Yahoo Finance

DB’s Jim Reid concludes the overnight wrap

I hope you all had a nice weekend. After a couple of months of relentless heat, and with London threatening 37°C again on Thursday, please never let me complain about the cold, wet British weather again. I’m actually starting to feel nostalgic for it, even if I am quite grateful for the extra 40 yards of run on the fairways. I’m looking forward to the cool mountain air of the Alps next week… … oh wait… it’s also shaping up to be the hottest alpine summer on record, with barely any glacial snow left to run headfirst into to cool down. So there appears to be little respite on the horizon.

There’s not much respite in markets either. Following Friday’s payrolls report, which was somewhat mixed but appeared more dovish than hawkish at face value, attention this week will be firmly on July US CPI (Wednesday), which could go a long way towards tipping the balance for September FOMC pricing. Futures pricing fell by around 10 percentage points immediately after the release on Friday, leaving the implied probability at 44%.

Don’t forget US PPI (Thursday) as well, especially for the components that feed directly into core PCE. Other US highlights include retail sales and the preliminary University of Michigan consumer sentiment survey (both Friday). Elsewhere, attention will focus on the RBA policy decision (tomorrow), the Norges Bank meeting and UK Q2 GDP report (Thursday), and inflation releases across Asia and Europe. Corporate earnings are quieter than in recent weeks but reports from Tencent, BYD, Cisco, Applied Materials and CoreWeave will still attract attention.

Before we go into the week ahead in more detail the situation in Iran remains finely balanced with Iran’s latest political and security moves suggesting that Tehran is trying to balance a tougher domestic posture with a continued search for a diplomatic off-ramp. The appointment of former Revolutionary Guard commander Mohsen Rezaee to head the Supreme National Security Council reinforces hard-line influence at the centre of decision-making, even as Iranian officials insist they are close to an agreement with Oman on a new shipping framework through the Strait of Hormuz. Foreign Minister Abbas Araghchi has described the talks as being in their final stages, but Tehran has stressed that any technical agreement on shipping routes would not by itself lead to a full reopening of the waterway. Reuters and other major outlets report that Iran continues to tie any lasting Hormuz arrangement to wider demands on the US, including sanctions relief, compensation for war damage and security guarantees. Oman has characterised the negotiations as constructive, while Washington has signalled a willingness to continue talks despite periodic tensions. Brent is up around +0.8% this morning but US and European equity futures are fairly flat.

In Asia the Nikkei (+1.80%) is strong this morning but the KOSPI is fading after a decent start and is now broadly flat on the day. Elsewhere, Chinese equities are mixed, with the CSI 300 declining -0.52%, while the Hang Seng and Shanghai Composite are up +0.72% and +0.20%, respectively. In Australia, the S&P/ASX 200 is down -0.42%, surrendering a portion of the gains recorded on Friday.

China’s weekend July inflation data underscored the fading impact of this year’s oil shock and a loss of domestic economic momentum. Headline CPI slowed to 0.5% y/y (vs. 0.8% expected, 1.0% prior), while core CPI eased to 0.9% y/y from 1.0% (1.0% expected). Producer price inflation also came in softer than anticipated, with PPI rising 3.5% y/y (vs. 3.9% expected, 4.1% prior), suggesting that easing commodity costs and still-weak domestic demand are limiting pricing pressures.

This all follows last Friday’s US payrolls report certainly offering a mixed assessment of labour market conditions. Headline payrolls unexpectedly fell by -23k, private payroll growth slowed to just +30k, and the previous two months were revised down by a cumulative -103k. However, according to our economists, much of the weakness was concentrated in two sectors – leisure and hospitality (-40k) and local government education (-50k), while goods-producing employment and construction both posted their strongest gains in several months. At the same time, the unemployment rate declined to 4.1%, its lowest level since early 2025. Our economists view the report as consistent with a broadly stable labour market rather than a sharp deterioration, noting that demographic factors continue to weigh on participation. The softer payrolls data has reduced the urgency for further Fed tightening in the near term, but with labour market slack only gradually increasing, it’s over to Wednesday’s US CPI.

On this big number, our economists expect headline CPI to rise by +0.15% mom after June’s -0.42% decline, while core CPI is forecast at +0.26% mom following an unchanged reading in June. Lower gasoline prices should keep headline inflation softer than core, and if forecasts are realised both headline and core annual inflation rates would edge down by around one-tenth to 3.45% and 2.51% respectively. Markets will also be watching for evidence of payback from several unusual price moves in June, particularly across parts of core goods and services.

Attention will then turn to July PPI on Thursday. Our economists expect headline producer prices to rise by +0.22% mom, with core PPI at +0.3% mom. Particular focus will fall on categories that feed into core PCE inflation, including healthcare services, airfares and portfolio management. Our economists are currently tracking +0.22% in July and 3.3% YoY.

Friday’s US data will offer the first major read on Q3 activity. Our economists expect retail sales to increase by +0.3% mom in July, while lower fuel prices may weigh on the headline figure relative to underlying spending measures. The preliminary University of Michigan consumer sentiment survey is expected to ease to 52.5 in August from 55.2 previously. Fed speakers are relatively sparse, although comments from Cleveland Fed President Hammack and Richmond Fed President Barkin may attract attention following the inflation data.
Outside the US, we have a couple of G10 central banks in focus this week. The Reserve Bank of Australia announces its policy decision tomorrow, with our economists (and the market) expecting rates to remain unchanged at 4.35%. Norges Bank follows on Thursday with a 25% probability of a hike priced in.

In Europe, the key release will be the UK’s Q2 GDP report on Thursday. Our economists expect June GDP to contract by -0.1% mom, leaving quarterly growth at +0.4% qoq, although risks are seen as tilted to the downside. Elsewhere, Norway and Denmark both publish July CPI figures today.

On the corporate side, the earnings season is becoming less intensive, with 400 out of the S&P 500 having now reported, but several notable companies remain on the calendar. In the US, investors will focus on results from Cisco, Applied Materials and CoreWeave, while in China attention will fall on Tencent and BYD.

Recapping last week now and markets were dominated by developments surrounding talks with Iran. Investors priced de-escalation in Middle East tensions as negotiations between Iran and Oman progressed, though some of that optimism then faded as details of a potential agreement on Thursday raised questions over whether the US would accept the deal and just how free-flowing shipping through the Strait of Hormuz would be. Energy prices moved sharply lower through the middle of the week, and while Brent crude rebounded from lows of around $78/bbl on Wednesday, it still finished the week down -7.29% to $83.55/bbl (+1.29% on Friday). WTI crude was down -7.67% to $78.18/bbl (+1.15% on Friday), while European natural gas futures slid by -4.42% over the week.  

The fall in energy prices supported a risk-on move, helping the S&P 500 (+3.58%, +0.62% Friday), Stoxx 600 (+1.70%, +0.31% on Friday), DAX (+2.69%, +0.69% Friday) and CAC 40 (+2.41%, +0.17% Friday) all reach new record highs. For both the S&P 500 and the NASDAQ (+5.19%, +1.30% Friday), this also marked the largest weekly gains since April. Equities were also supported by the continued rebound in the AI trade that had started late the previous week. The Phily Semiconductor (Sox) Index rose +9.24% last week (+2.56% on Friday) after a difficult July. Other risk assets also benefited, with US HY credit spreads (-15bps) seeing their joint biggest weekly tightening since April.  
Friday’s risk asset rally followed the soft US July Jobs report that saw markets dial back prospects of a September Fed hike. Following the print, investor pricing of a September Fed rate hike fell to 44% (from 72% a week earlier and 57% on Thursday). In turn, Treasury yields declined, with the 2yr (-9.6bps, -5.3bps Friday), and 10yr (-9.0bps, -3.5bps Friday) yields posting their largest weekly declines since May. In Europe, government bond yields also declined, with the 10yr gilt (-12.9bps, -1.7bps Friday), BTP (-12.0bps, -1.8bps Friday), and bund (-7.4bps, -0.8bps on Friday) yields all lower. The European bond rally was supported by the pullback in inflation pricing amid lower oil, with the Euro 1yr inflation swap down -13.1bps to 2.26% (+5.9bps on Friday).

In FX markets, the yen remained a major focus following recent intervention effort, while stronger Japanese wage growth and more hawkish signals from the Bank of Japan reinforced expectations for additional policy tightening. The yen ended the week a marginal -0.23% weaker against the US dollar at 157.76 (+0.42% Friday). Meanwhile, gold rose +7.30% to $4,342/oz (+2.44% Friday) in its best week since January.