Market News

As we get into the new week, it seems like it will only be a matter of time before oil starts knocking on the door of $100 again. And this time around, markets may want to pay closer attention.

We already got a taste of things during the previous episode back in March to May. But now, we're well over six months from the US-Iran conflict and renewed tensions between the two sides. And the bigger worry is that there doesn't seem to be any appetite for de-escalation this time around.

Ship traffic along the Strait of Hormuz is basically at a standstill, despite what Trump may claim and what backdoor channels may apply. And the longer this persists, the higher the chances are there will be a further dislocation in the oil market in terms of…

Saudi Aramco’s oil facilities in Jizan were targeted on Monday in new wave of strikes, raising concerns over risks to Saudi oil supplies, according to the Financial Times.

The extent of the damage is still being assessed. According to people familiar with the incident, the latest strike was similar in scale to the attack last month, which temporarily disrupted some production at the facility. Aramco has not yet provided an official comment on the latest incident.

Jizan, located in southwestern Saudi Arabia close to the Yemeni border, has repeatedly been targeted by Yemen’s Iran-aligned Houthi movement. Previous attacks have hit Saudi oil infrastructure in both Jizan and Yanbu, adding another layer of geopolitical risk to an already…

FUNDAMENTAL OVERVIEW

 

The S&P 500 erased some of its Thursday’s gains as the US NFP reporton Friday showed job growth in August almost tripling the consensus estimate of 56K. This triggered a hawkish repricing in interest rates expectations, with the odds for a September hike jumping back to roughly 58%.

This week is all about the US CPI data. Unless, we get some surprising breakthrough in US-Iran relations, the price action will likely remain mostly rangebound or a bit negative as traders at some point might start hedging into the CPI release. Moreover, there's still some room to erase the Waller-driven gains, so the sellers should remain in control into the CPI.

A soft or…

FUNDAMENTAL OVERVIEW

 

USD:

The US dollar spiked to the upside on Friday after the US NFP report showed job growth in August almost tripling the consensus estimate of 56K. The dollar gains didn’t last long, though, as most of the NFP-driven moves got faded thereafter.

This happened because the market focus was not on the NFP report, but on the CPI. The market pays attention to the data that the central bank is focused on, and the Federal Reserve is currently focused on inflation.

In fact, just a day before the NFP report, Fed’s Waller mentioned that he would support keeping interest rates unchanged at the upcoming FOMC meeting, but a hot CPI would make him…

FUNDAMENTAL OVERVIEW

 

Oil prices rose again on Friday following reports of Iran’s ballistic missile launches. Iranian forces recently said they were going to switch from defensive tactics to launching pre-emptive strikes against US military assets across the Middle East.

The increase in the risk premium has kept oil prices supported, as intensifying US-Iran strikes in the Strait of Hormuz have fuelled fears of prolonged supply disruptions.

In other news, OPEC+ kept October oil output unchanged over the weekend as disruptions in the Strait of Hormuz have reduced the group’s ability to influence physical oil supply and prices. The oil market has been driven solely…

• Eurozone Q2 final GDP +0.6% vs +0.4% q/q second estimate
• Prior (Q1) 0.0%

The breakdownThe positive revision is definitely a welcome boost for euro area policymakers. That especially after the more stagnant momentum seen in Q1.

The annual growth of euro area GDP even increased to 1.2%, beating the second estimate of 1.0% as well; much better than 0.3% in Q1 too.

Looking at the details, trade was the dominant driver in adding 0.9% to euro area GDP growth. Household consumption helped a little by posting a 0.2% contribution, before being offset by a drag in investories - which subtracted 0.5% from Q2 GDP.

All in all, the Q2 rebound looks stronger on the surface than underneath. Growth was heavily driven by exports and net trade rather than a…

It's a new week but the key focus in the FX market is still on the Japanese yen. After a minor bounce back on Friday, USD/JPY is now under heavy pressure again as it falls through the 155.00 level for the first time since February this year.

That is a big, big blow to dip buyers and from a technical perspective, opens up the door for a further downside run if sustained.

The daily chart above shows the significance of the break, with it also cracking under key daily resistance near 155.50.

As mentioned earlier:

"Be it any real intervention or yen shorts/speculators bailing for just a bit last week, the line on the charts is clear. The key risk now is on any break below the 155.00 level. Hold the line and dip buyers will stay in with a shout to…

FUNDAMENTAL OVERVIEW

 

Gold spiked to the downside on Friday after the US NFP report showed job growth in August almost tripling the consensus estimate of 56K. The losses didn’t last long, though, as most of the NFP-driven moves got faded thereafter.

This happened because the market focus was not on the NFP report, but on the CPI. The market pays attention to the data that the central bank is focused on, and the Federal Reserve is currently focused on inflation.

In fact, just a day before the NFP report, Fed’s Waller mentioned that he would support keeping interest rates unchanged at the upcoming FOMC meeting, but a hot CPI would make him consider a rate hike.

<p class="MsoNormal" style="margin: 0 0 8px; font-family: Aptos, sans-serif; line-height: normal; font-size:…

• Eurozone September Sentix investor confidence index 5.1 vs 2.0 expected
• Prior 0.9

The breakdownThat's a solid beat on estimates as the index has now risen for five straight months and reached its highest level since February 2022.

The rise was driven by both better current conditions and stronger expectations going into September. The former improved to -3.3 from -8.0, while the latter climbed to 13.8 from 5.3.

Of note, Germany was a major contributor, with its headline index jumping to -2.8 from -11.9, its fourth straight increase.

Overall, investor confidence is improving materially across the euro area, and importantly, Germany is now helping rather than holding back the recovery in sentiment.

What does the data measure?It surveys investors…

China’s gold-buying spree continued in August, helping to reinforce one of the most important structural sources of demand underpinning the precious metal.

The PBOC announced that it held 76.73 million troy ounces of gold at the end of August, up from 76.08 million ounces in July. That extends the buying streak to 22 months now.

Meanwhile, the reported value of China’s gold reserves surged to $350.08 billion - up from $306.35 billion in July.

Just be wary that the $43.7 billion jump does not mean China bought that amount of gold during the month. The value difference is mostly a reflection of the sharp rise in the market price of bullion, alongside the additional physical purchases.

So, why does China keep buying gold?

The big picture story is…

There's a light week ahead, as is usually the case after the NFP, starting with bank holidays in the U.S. and Canada. On Tuesday, Japan will release its GDP q/q, while Australia will publish the Westpac consumer sentiment data.

On Wednesday, the U.S. will release the ADP weekly employment change, with two simultaneous releases as the source skipped last week's data release. Thursday brings the ECB monetary policy announcement for the Eurozone, while the U.S. will release PPI m/m, unemployment claims and existing home sales.

Finally, on Friday, the main focus will be on the highly anticipated U.S. inflation data, alongside the preliminary UoM consumer sentiment and preliminary UoM inflation expectations. The Fed will also release its…