MARKET WRAPS
Watch For:
No major economic events expected; trading update from Tullow Oil
Opening Call:
European stock futures traded higher early Monday. Asian stock benchmarks were mixed; the U.S. dollar and Treasury yields inched higher; oil futures rose and gold weakened.
Equities:
Stock futures pointed to a higher open in Europe, but may be weighed by the U.S.-Iran talks hitting a wall after President Trump rejected Iran's latest proposal for a seven-day ceasefire. Tehran's proposal would have reopened the Strait of Hormuz and resumed nuclear talks in return for a lifting of the U.S. blockade of Iranian ports. But privately, Trump was skeptical Iran would meet his demands and has told his staff that he sees a renewed bombing campaign after the November midterms as likely, The Wall Street Journal reported Friday, citing U.S. officials.
"The rise in oil prices alongside higher long-term yields suggests markets are attaching a larger inflation risk to the global outlook," said Lloyd Chan, senior currency analyst at MUFG.
This week's economic highlights include the release of the U.S. personal consumption expenditures price index for August from the Bureau of Economic Analysis on Wednesday and the September jobs report by the Bureau of Labor Statistics on Friday.
Forex:
U.S. dollar edged higher. The global backdrop remains challenging as elevated oil prices and high global yields continue to reinforce each other, MUFG Bank's Lloyd Chan said. Middle East tensions are high, with no clear resolution to the disruption along the Strait of Hormuz nor when oil supply can be normalized, he added.
Bonds:
The coming week will be big for the bond market with the release of the August PCE report and the September jobs report. With yields on long-dated Treasury notes and bonds at levels not seen in two decades, the U.S. economic data could determine whether yields rise even further if the data surprise to the upside.
Analysts are forecasting the August headline PCE index to rise 0.4% month over month from 0.2% in July, while remaining unchanged at 3.7% year over year.
Analysts expect to see only 100,000 jobs created in September, down from 162,000 in August. Meanwhile, the unemployment rate is expected to remain unchanged at 4.1%.
Energy:
Oil prices rose. Prices are still expected to decline, but the path lower is likely to be more gradual as the endgame of the U.S.-Iran conflict becomes increasingly difficult to predict, OCBC Group Research strategists said. Disruptions to the Strait of Hormuz, tighter U.S. sanctions on Iran, shrinking inventories, and constrained refining capacity are keeping a firm floor under crude and refined product prices, they added.
Metals:
Gold was lower early Monday. Spot gold fell to its lowest level since early August in Asian trade. Higher oil prices and strong U.S. industrial activity data reinforced expectations that the U.S. Fed may need to keep policy tighter for longer, ANZ Research said.
Rising yields and a strong U.S. dollar will likely keep the macro backdrop challenging for the yellow metal, it added.
Iron ore fell. Prices were likely weighed by weak steel demand, ANZ Research said. The China Iron and Steel Association has urged mills to curb production and draw down inventories to protect margins and limit excess supply, it added.
TODAY'S TOP HEADLINES
The Moves That Backfired on Trump and Drove Interest Rates and Inflation Higher
In the early days of President Trump's second term, his economic advisers laid out a simple theory: Show the bond market that Washington was serious about closing its gaping deficits, and long-term interest rates would fall on their own. Trump could leave the Federal Reserve alone.
It hasn't worked out that way.
Why the upcoming jobs report could send 10-year and 30-year Treasury yields surging
The coming week will be big for the bond market from an economic-data standpoint, with the release of the August PCE report and the September jobs report. With yields on long-dated Treasury notes and bonds at levels not seen in two decades, the economic data could determine whether rates rise even further.
The 10-year BX:TMUBMUSD10Y and 30-year BX:TMUBMUSD30Y Treasury yields are closing in on their next major technical resistance levels, which could see them break out and surge to 5.6% and 5.9%, respectively, over the near term. And with expectations for the jobs report fairly low, it may not take much for them to reach those levels.
Iran Pressed to Make Nuclear Concessions to Revive Peace Talks With U.S.
Peace negotiators are pressing Iran to make a concession on its nuclear program to revive ceasefire talks with the U.S. after President Trump rejected Tehran's truce proposal, in a race to stop the conflict from escalating back into all-out war.
Mediators involved in the talks said it is a long-shot bid to get Iran to placate Trump on the issue he cares about most. Trump has tried to reframe the conflict around his original war goal of preventing Iran from obtaining a nuclear weapon, and redirect talks away from unlocking the Strait of Hormuz from Iran's grip. In a speech to the United Nations last week, Trump said he was weighing whether to "annihilate" Iran's government to keep it from gaining a nuclear bomb.
Egypt Warned Netanyahu of Impending Attack on Israel Before Oct. 7
Egypt's intelligence chief, Abbas Kamel, was growing anxious.
It was early October 2023 and two Egyptian warnings about signs of an impending attack from Gaza had gone unheeded by Israel. Kamel called Israeli Prime Minister Benjamin Netanyahu to deliver a third alert, said officials in an Arab government.
Prada Is Wooing the Ultrarich With Snorkeling Trips and $100,000 Skirts
MILAN-Prada flew more than 100 of its best customers here for this city's storied Fashion Week, giving them private access to Leonardo da Vinci's "Last Supper" and dinners at restaurants booked out just for them.
Some watched models carry crocodile handbags-revived from a 1920s design and finished with clasps featuring onyx-down the runway at Prada's womenswear show last week. The bags were offered exclusively to top clients the next day for a little over $20,000.
Defense Firms Are Rushing to Boost Missile Output. It's Coming Too Late.
A Tucson, Ariz., factory run by defense giant RTX is working around the clock to increase production of Tomahawk and other missiles in short supply for U.S. operations against Iran.
Lockheed Martin is adding hundreds of workers in Arkansas to triple its output of much-needed Patriot interceptors. Subcontractors including Boeing, L3Harris and Northrop Grumman have broken ground on new assembly lines to meet soaring demand for electronics, rocket motors and other components needed for the weapons.
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Expected Major Events for Monday 06:00/SWE: Aug Foreign trade
06:00/NOR: Aug Retail Sales
07:00/SVK: Aug PPI
08:00/AUT: Sep Austria Manufacturing PMI
08:00/ITA: Aug Foreign Trade non-EU
23:01/UK: Sep Shop Price Monitor
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