Market Summary
Asian Stocks Fall as Oil Prices Fuel Inflation Concerns: Asian stocks declined, following losses among their US peers, as higher oil prices added to concerns that inflation will accelerate. The MSCI Asia Pacific Index fell, while Japanese and South Korean equities also moved lower. The renewed pressure on risk assets comes as investors reassess the outlook for global growth and interest rates amid escalating tensions between the US and Iran.
Brent Crude Surges Above $100 Before Pulling Back: Brent crude rose as high as $101.94 a barrel in early Asian trading after Iran vowed that it was prepared for a more intense war with the US. Prices subsequently reversed some of those gains and were trading at around $101.06, highlighting continued volatility in energy markets. Brent settled above $100 on Wednesday, its highest close since late May, following intensified tanker attacks involving Iran and the US. The risk of further disruption to oil supplies and shipping through the Strait of Hormuz remains a key concern for markets.
Fed Rate-Hike Bets Increase as Oil Raises Inflation Risks: Markets are increasingly pricing in tighter US monetary policy as the surge in energy prices threatens to accelerate inflation. Swaps now imply around a 62% probability of a 25-basis-point Fed rate hike at the September 15–16 meeting, up from 60% on Tuesday. At least two rate hikes by the middle of next year are now fully priced in, marking a significant shift in expectations as investors assess the potential impact of the oil shock.
US 10-Year Yield Holds Near 4.85% After Treasury Buyback: The US 10-year Treasury yield remained near Wednesday’s high of 4.85% after the Treasury announced plans to purchase up to $6 billion of longer-dated debt. The move disappointed some investors who had expected a larger increase in the size of the buyback. Higher oil prices and rising expectations for Fed tightening continue to put upward pressure on yields.
Euro Edges Higher Ahead of ECB Decision: The euro strengthened modestly against the dollar ahead of today’s European Central Bank monetary policy decision, with policymakers widely expected to raise interest rates by 25 basis points. The decision comes as European policymakers face renewed inflation risks from higher energy prices while also having to balance concerns about economic growth.
Economic Calendar
- US Jobless Claims
- US PPI
- ECB Interest Rate Decision
- US Home Sales
- Argentina CPI
Key Market Moves Today
- S&P 500 Futures: +0.23% (7,661.0)
- US 10-Year Yield: +0.21 bps (4.85%)
- Brent Crude: -0.15% ($101.06)
- Spot Gold: +0.36% ($4,414)
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