Oil Prices Retreat Despite Gulf Shipping Attacks
Crude benchmarks weakened on Monday, shrugging off attacks on Gulf shipping lanes and airports, after US President Donald Trump announced a Ukraine-Russia energy truce and floated letting Moscow boost diesel shipments abroad. The fine print stayed vague and the idea drew resistance from politicians in Washington. Brent first climbed during Asian hours, then reversed course, lately slipping 0.3% to $104.37 a barrel, under its recent high of $109.97. US crude futures shed 0.6% to $91.33.[S1]
Jim Reid, a strategist at Deutsche Bank, described the oil picture as still murky. In his view, a Russia-Ukraine truce plus a Russian diesel exemption might relieve some pressure on refined fuels, yet strikes on Riyadh and combat near Bab el-Mandeb keep a tail risk tilted toward higher oil and freight costs, on top of the ongoing turmoil in the Strait of Hormuz.[S1]
European Shares Gain, Asia Mixed as Earnings Season Begins
Cheaper crude lifted the mood in Europe, with the pan-regional STOXX 600 up 0.6% by 0742 GMT, helped by carmakers after China and the European Union struck deals covering hybrid vehicle exports. MSCI's gauge of Asia-Pacific shares outside Japan slipped 0.5%, and Chinese blue chips eased 0.7%. South Korean equities dropped 3.6%, Taiwanese shares were flat, while S&P 500 and Nasdaq futures each gained roughly 0.3% on Wall Street.[S1][S4]
Trading was quiet, with Japan shut for a holiday and the US Treasury market closed for Columbus Day, thinning volumes before the earnings season. Big US banks such as JPMorgan and Goldman Sachs report Tuesday, with Bank of America following Wednesday. TSMC, the largest maker of advanced AI chips, is expected Thursday to post a sixth straight quarter of record profit. Chip-equipment firm ASML reports Wednesday. LSEG IBES sees S&P 500 earnings up over 30% in the third quarter, mostly from tech, while STOXX earnings are seen rising 21%, or 9.7% excluding energy.[S1]
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Inflation Data and Central Bank Expectations in Focus
Treasury yields reached 24-year peaks this month as costly energy stoked fears that inflation would prove sticky, keeping officials hawkish and weighing on equity valuations. On Monday, euro area benchmark Bund yields drifted down slightly and French and Italian debt risk premiums narrowed a touch. Fresh tests arrive this week via US consumer and producer price data and retail sales. Higher energy costs are seen pushing CPI up a hefty 0.6% to 3.7% annually, with the core cooler at 0.2% and 2.5%.[S1]
Bruce Kasman, JPMorgan's head of global economics, said oil is still pricier than assumed, with shipping costs having surged and product prices even higher. In his view, the inflation signals point to a sharp headline rebound that will erode purchasing power, plus firmer core inflation that keeps central banks focused on near-term tightening. Markets price only an 18% chance of a Federal Reserve hike this month, versus 85% for December, and investors also bet on EU, Japanese and British hikes before year-end.[S1]
In currencies, the euro stayed defensive at $1.1205, having slid for five consecutive weeks on worries about European government deficits. The dollar index hovered near 17-month highs at 102.21, yet stalled against the yen at 158.44 as the prospect of Japanese intervention keeps speculators at bay for now. Among commodities, gold, which pays no interest, added 0.1% to $4,198 an ounce after rebounding more than 1% last week.[S1]
