The Dow futures are trading with gains of close to 200 points, as are the Nasdaq futures, which are gaining a similar quantum. The S&P 500 futures are trading 30-35 points higher.
For the week gone by, the Dow Jones had ended with gains of 1%, despite Wednesday’s 1,100-point Fed-led sell-off, while the S&P 500 and Nasdaq gained 1.6% each. However, for the month, the S&P 500 was down 0.1%, while the Nasdaq fell 3.2%. The Dow Jones posted a 0.3% advance, marking its fourth straight monthly gain.
Trump Calls Off Iran Attacks
US President Trump told reporters on board the Air Force One that the new Iran talks will begin Monday afternoon, after the US called off planned attacks against Iran over the weekend after pleas from allies in West Asia.
“It would have been the biggest attack since World War II,” Trump said, adding that they will see whether or not a deal can be made and that he is not looking to kill people.
The President alluded to Saudi Crown Prince Mohammed bin Salman, who told him that he would prefer continued talks over planned strikes.
Iran Foreign Minister Abbas Araghchi held separate talks with his Turkish and Saudi counterparts and also with the Pakistan army chief, stating that Iran is prepared to give a decisive response to any US military adventure.
Crude Oil Prices Fall
Brent crude prices fell as much as 7% in early Asia trading before the contracts began to pare some of the initial losses.
The Organization of Petroleum Exporting Countries (OPEC+) along with its allies, have agreed to hike output from September by another 1,88,000 barrels per day, which will, in theory, reverse the 2023 output cuts in entirety.
Separately, Ukraine also announced that it had attacked the Rosneft PJSC’s refinery in Russia’s Saratov overnight, which is designed to process 1.4 lakh barrels per day of oil.
Bond Markets Worried
Bond markets are not cooling off despite the fall in oil prices and a rise in equities.
The US 10-year yield crossed the 4.7% mark last week and remains at those levels at the resumption of trade after the weekend break. The 30-year yield is nearing 5.3%, which is the highest level since 2007.
Economists are warning that the bond markets could see a deeper sell-off if new Fed Chair Kevin Warsh does not outline the steps he is going to take to bring inflation down to the Fed’s 2% target.
According to Brandywine Global Investment Management, Warsh’s inflation-fighting credibility is eroding after he did not outline any policy steps to curb inflation. A New York Times report further went on to claim that Warsh is also planning to bring down the number of FOMC meetings in a year.
Currently, the CME FedWatch Tool is pricing in a 74% probability of the Fed to hike rates by 25 basis points in September.
The Week Ahead
The markets will be looking forward to the jobs report for the month of July this week, while also reacting to earnings reports from companies such as SpaceX, AMD, Sandisk, Western Digital, Eli Lilly, and even Berkshire Hathaway.
