Macro Update
Oil prices rebound sharply: Brent crude jumped 2.7% to $107.16 a barrel after President Trump rejected Iran’s proposal to reopen the Strait of Hormuz, taking monthly gains to almost 18% and keeping tensions in the Middle East elevated.
Asian equities come under pressure: Chinese blue-chip stocks fell 1.9% to a one-year low as US lawmakers moved to restrict Chinese-made components in federal AI systems, while South Korea’s market dropped 2% and Japan’s Nikkei ended flat.
Long-dated Treasury yields rise: The 30-year Treasury yield edged up to 5.52%, close to its highest level since 2004, having risen 27 basis points this month amid persistent inflation concerns and expectations of higher-for-longer Federal Reserve policy.
Fed rate-hike expectations remain elevated: Markets are pricing in a 70% probability of a second consecutive rate increase in October, while the Reserve Bank of Australia is also expected to tighten policy on Tuesday following a run of stronger-than-expected US economic data.
Dollar climbs to two-month peak: The dollar index advanced to 101.39 on the back of upbeat US economic figures, leaving the euro at $1.1383 and sterling near a three-month low of $1.3240 despite hawkish signals from the Bank of England.
Gold prices retreat: Bullion fell 2.2% to $4,192 an ounce and is down more than 4% this month, as rising bond yields and inflation concerns fuelled by higher oil prices increased the opportunity cost of holding the non-yielding metal.
