Oil prices slid in early European trade on fresh Middle East optimism, while Nasdaq futures fell as investors position ahead of Nvidia’s narrative-setting earnings and U.S. inflation data.
A flurry of positive headlines around diplomatic efforts to reopen the Strait of Hormuz soothed oil investors, sending global oil benchmarks below $87 a barrel. The fall comes after Iranian and Omani diplomats discussed a framework that would allow shipping to resume through the strait, the countries said in a joint statement.
Lower oil prices buoyed equity markets in Asia and Europe, though U.S. stock futures largely pulled back Wednesday.
U.S. Treasury yields edged higher after dropping Tuesday, while the dollar edged higher. Bitcoin remained elevated, but traded below the $80,000 level hit in the last session.
Investors await PCE inflation data for July, a print that will help shape market expectations for the Federal Reserve’s rate-setting path. Investors also watch for the second estimate of U.S. GDP growth for the second quarter. Nvidia results after market close Wednesday will be closely watched, with the artificial-intelligence chip company’s earnings and guidance seen as a key barometer of the AI trade.
—In early European trading, Brent crude contracts for October delivery fell 2.5% to $86.38 a barrel, while WTI contracts dropped 2.6% to $80.20 a barrel. As well as talks between Iranian and Omani diplomats, “anecdotal evidence suggests there is an increasing flow of vessels utilizing the Omani route through Hormuz,” ANZ analysts said. In addition, Axios reported that around 40 ships transited the strait over the weekend, while The New York Times reported U.S. diplomats would return to the Middle East.
—In the U.S., futures for the Dow Jones Industrial Average were flat, while S&P futures slipped 0.1%. Nasdaq futures fell 0.25%. As well as quarterly earnings from Nvidia—the world’s most valuable company—software groups CrowdStrike, Salesforce and Synopsys will report earnings after market close.
—In Asia, South Korea’s Kospi rose 1.0%, with chip-making index heavyweights SK Hynix and Samsung Electronics advancing 0.6% and 1.75%, respectively. Hong Kong’s Hang Seng Index rose 0.75% and China’s Shanghai Composite added 0.6%.
—European stock indexes largely rose at the open. Software and AI-linked stocks weakened, though banks gained as the Europe-wide Stoxx 600 rose 0.1%. In Paris, the CAC 40 gained 0.3% as luxury stocks recovered some of Tuesday’s losses. The German DAX edged 0.1% lower, as gains for banks—Deutsche Bank rose 2.4%—were outweighed by a 2.5% fall for index-heavyweight SAP. London’s FTSE 100 was flat. Oil majors fell on lower crude prices—BP and Shell declined 2.1% and 1.4%, respectively—though precious metals miners gained. Italy’s FTSE MIB rose 0.2%, while the IBEX 35 added 0.2%. The Dutch AEX slipped 0.2% as AI-related stocks weakened ahead of Nvidia earnings. ASML fell 1%.
—The U.S. dollar traded marginally higher as markets await the release of the July PCE data at 1230 GMT, the Federal Reserve’s preferred gauge of inflation. The Kansas City Federal Reserve’s upcoming Jackson Hole symposium later this week will also be key for the dollar if Fed Chairman Kevin Warsh recommits to taming inflation. Standard Chartered’s Steve Englander and John Davies said that Warsh will aim to restore investor confidence that “the Fed will do what it takes to lower inflation” and “convey a sufficiently strong commitment to achieving inflation targets to reduce market term premia and fears of fiscal dominance.” The DXY dollar index rose 0.1% to 98.997.
—U.S. Treasury yields mostly edged higher in Asian trade, having moved lower across the curve on Tuesday as oil prices fall. The 10-year Treasury yield is up 0.6 bps at 4.643%, while the 30-year yield was up 0.8 bps at 5.181%.
—Eurozone government bond yields declined, with the 10-year German Bund yield slipping below 3.20% for the first time since Aug. 14. Jefferies’ positioning indicators suggest “close to stretched” short positions in long-dated Bunds and U.S. Treasurys, Jefferies’ Mohit Kumar said. The 10-year Bund yield falls more than 2 basis points to a low of 3.186%, according to Tradeweb.
—Bitcoin moved higher, although it stays below the psychologically important $80,000 level. “The cryptocurrency has gained about 25% during August, while recent momentum has been supported by a softer U.S. dollar, falling long-term Treasury yields, renewed institutional demand and expectations for a clearer U.S. digital-asset regulatory framework,” Zaye Capital Markets’ Naeem Aslam said in a note. Bitcoin was last up 0.4% at $78,851.52.
—New York gold contracts slipped 0.25% to $4,683.30 a troy ounce in early European trade.
Write to Barcelona Editors at barcelonaeditors@dowjones.com
