MARKET WRAPS
Watch For:
Euro area monetary developments, consumer confidence for Germany; no major corporate trading updates expected
Opening Call:
European stock futures traded higher early Friday. Asian stock benchmarks were mixed; the dollar inched higher; Treasury yields were flat; while oil futures lost ground and gold rose.
Equities:
Stock futures point to a higher open in Europe, even as dissonant reports on Middle East attacks and negotiations weighed on Wall Street overnight.
Saudi Arabia said it intercepted ballistic missiles launched at the kingdom, after Iranian President Masoud Pezeshkian said Tehran will never give up its nuclear program. Separately, talks between the U.S. and Iran focused on a phased deal to reopen the Strait of Hormuz.
New proposals include a seven-day pause in fighting that could pave the way to end Iran's attacks on shipping in exchange for the U.S. lifting its blockade, people familiar with the matter said.
Forex:
Growing expectations that the Federal Reserve will raise interest rates again are underpinning strength in the U.S. dollar, DHF Capital's Bas Kooijman said.
"Rates are once again at the forefront of investor concerns, as long-term U.S. Treasury yields consolidate around or above the 5% threshold-a level that carries significant psychological weight for the markets," Tikehau Capital's head of capital markets strategies Raphael Thuin said.
Bonds:
Treasury yields hit multiyear highs overnight, with investors losing their appetite for risk as the odds of further rate increases from the Fed this year increase.
Philadelphia Fed President Anna Paulson said that the central bank has yet to see data indicating that inflation is coming under control. "If conditions evolve as I expect, some modest further tightening may be warranted," said Paulson, who is a voting member of the policy-setting Federal Open Market Committee.
Paulson's remarks echoed those of New York Fed President John Williams, who said that raising rates again in 2026 was "reasonable."
Energy:
Oil prices retreated as traders weighed the latest headlines around efforts to reopen the Strait of Hormuz, the critical energy shipping lane blocked by fighting in the Middle East.
Oil is following the now-familiar pattern of ebb and flow, settling higher overnight after Houthi attacks on Saudi targets raised concerns of escalation. Iran's foreign minister landed in Doha on Sunday to discuss new proposals including a seven-day pause in fighting that could pave the way to end Iran's attacks on shipping in exchange for the U.S. lifting its blockade.
However, market participants remain cautious, given the history of failed negotiations between Washington and Tehran, OCBC strategists said.
Metals:
Gold is under pressure as higher oil prices and resilient U.S. activity data reinforce expectations that the Fed might need to keep its policy tighter for longer, ANZ Research analysts said. Copper prices strengthened, as tight physical supply continues to provide support, Baocheng Futures analysts said. Chinese inventories remain at a low level while spot availability continues to be tight, they added. Demand is also showing signs of improvement.
TODAY'S TOP HEADLINES
The Robust U.S. Economy Powers Through Rate Increases and Rising Bond Yields
The U.S. economy keeps powering through inflation, tariffs and higher borrowing costs, defying a run-up in Treasury yields and a Fed rate increase. That has the bond market spooked.
The usual economic brakes aren't slowing growth, hiring or an AI investment boom that looks to be unstoppable. To some, AI's potential returns seem so bright that even steep interest rates won't slow down tech companies' investments.
Trump and Xi Seek Cooperation as Trade and AI Tensions Persist
Before a closed-door meeting with President Donald Trump, Chinese leader Xi Jinping on Thursday urged cooperation and stronger communication. He said the two rivals should be in a race to catch up with one another, "not a wrestle where one wins versus the other."
Xi's first visit to the White House in a decade comes as the two leaders are trying to manage their rivalry despite increasing friction, including on Iran and in the AI race, which U.S. officials have described as a winner-takes-all battle. Beijing has continued to support Iran as its biggest oil buyer and on other fronts.
France to Deploy Forces to Protect Saudi Red Sea Oil Port
PARIS-President Emmanuel Macron said on Thursday that France plans to send troops to Saudi Arabia to help protect a refinery and crude oil pipeline in the Red Sea port of Yanbu, ramping up France's military efforts to contain the impact of the Iran war.
"We are going to send military assets, that is, soldiers, radar systems, and defense systems to protect this site," Macron said in a TV interview on Thursday. However, he stressed that France was "not getting involved in any conflict," adding that the decision had been finalized with Saudi authorities.
Why the Gulf Wants Trump to Hold the Line on Iran
DUBAI-Efforts to rekindle talks to end the war between the U.S. and Iran are running into resistance from major Persian Gulf oil producers that have swung against any accommodation of Tehran, people familiar with the matter said.
Mediators including Qatar are pressing for a fresh round of talks in Oman as soon as next week to try to get Washington and Tehran to reopen the Strait of Hormuz and start the process of winding down the war. President Trump said Tuesday he believed the two sides would meet again soon.
The Debate Over a Diesel Export Ban Is Giving Europe Whiplash
A year ago, President Trump threatened tariffs on European countries if they didn't buy more U.S. energy exports. Now, he is threatening to cut off diesel supplies that have become vital to the region.
Officials on the Continent are scrambling to persuade the Trump administration to hold back.
Anthropic to Pay Akamai Technologies $11.6 Billion Over Seven Years for Cloud Services
Anthropic will pay Akamai Technologies at least $11.6 billion to use its cloud infrastructure and software over seven years in an expansion of the partnership between the two companies.
The deal provides for a potential $9 billion expansion, representing a total potential commitment of around $20 billion, Akamai said Thursday. The new commitment adds to upwards of $2.8 billion in existing multi-year cloud commitments across its customer base announced this year.
U.S. Files to Intervene With EU Decision on X, Elon Musk
The U.S. has filed an application to intervene in the legal disputes between Elon Musk and the European Union.
The U.S. is supporting applications to annul a decision by the European Commission that found Elon Musk and his company X liable for violations of the EU's Digital Services Act. The EU imposed a fine jointly and severally of 120 million euros, equal to about $136.5 million.
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Expected Major Events for Friday 06:00/SWE: Aug PPI
06:00/DEN: Aug Central Government Finance & Debt
06:00/GER: Oct GfK consumer climate survey
06:00/DEN: Aug Retail Sales Index
06:30/HUN: Aug Employment & unemployment
06:45/FRA: 2Q Job creation
07:00/SPN: 2Q Final GDP
08:00/EU: Aug Monetary developments in the euro area (M3)
08:30/UK: Aug Capital issuance statistics
09:00/LUX: Jul Trade
16:59/HUN: 2Q Balance of Payments
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