Oil Futures Rise on Middle East Tensions, U.S. Gulf Storm — Market Talk
1033 ET - Oil futures are higher in early U.S. trading with continuing tensions in the Middle East and the market watching the storm heading for the U.S. Gulf coast. Tropical Storm Isaias is expected to be a hurricane when it reaches the U.S. coast late Friday, according to the National Hurricane Center, although the projected path has shifted east of the main oil-producing areas. Consulting firm Earth Science Associates estimates the storm could result in shut-in production of about 11.2 million barrels of oil and 13.3 billion cubic feet of natural gas. Front month WTI is up 0.6% at $89.98 a barrel and Brent gains 1.2% to $101.76 a barrel. ([email protected])1019 ET - MTY Food Group faces persistent macroeconomic headwinds and high uncertainty driven by intense quick-service restaurant competition. RBC's Ryland Conrad says in a report that uncertainty hinges around the scope, probability, timing and valuation of any potential transaction around MTY's ongoing strategic review, now in its tenth month. While an outcome could act as a catalyst for the stock, "sustained macro and competitive headwinds to limit any meaningful improvement in the near term." As a result, Conrad says the "focus remains on MTY's organic growth trajectory" where management continues improving and strengthening its network. The company is expected to report its 3Q results on Oct. 9. ([email protected])0938 ET - The sharp rise in Treasury yields leaves bitcoin vulnerable as it limits the amount of liquidity available for risky assets, Zaye Capital Markets analyst Naeem Aslam says in a note. Given high long-end yields, bitcoin remains "highly exposed to every shift in the market's view of inflation, monetary policy and global risk appetite," he says. Bitcoin could fall further if the minutes of the Federal Reserve's September meeting at 1800 GMT signal the prospect of further near-term interest rate rises, lifting Treasury yields and the dollar. A more cautious message could improve liquidity expectations and help bitcoin retest recent highs, he says. Bitcoin falls 2.3% to $83,664 after reaching a one-week low of $83,454 earlier, according to LSEG. ([email protected])0934 ET - The U.S. dollar's recent run-up could maintain momentum based on what today's Fed minutes reveal, Infinox's Thadeu Dos Santos says in a note. While an October rate hike has been largely priced out, any evidence of broad support for further hikes could rebuild short-end yields and extend the dollar's gains, the analyst says. A more cautious readout could reverse those gains, he says. After that, Thursday's jobless claims report will provide another potential catalyst, indicating whether the latest signs of labor market weakness is broadening, the analyst says. ([email protected])0852 ET - Treasury yields push higher after two sessions where they fell, as markets wait for Fed minutes and a 10-year auction. Oil rises 1% and the dollar strengthens. Investors will scrutinize the discussions that led the central bank to raise rates for the first time in three years. Inflation data due next week will set expectations for the next move, which is currently priced in as a hold. The Treasury is auctioning $39 billion in 10-year notes. High yields have attracted buyers in recent tenders. The 10-year yield rises to 5.347% from 5.270% yesterday. The two-year increases to 4.823% from 4.789%. The 30-year is at 5.752%, a level not seen since 2002. ([email protected]; @ptrevisani)0820 ET - The FOMC minutes will be closely examined as investors try to glean clues on the thinking of policymakers when they raised rates last month. BMO's Ian Lyngen says a common theme among investors before the Fed meeting was that Chairman Warsh needed to hike to maintain credibility, and not directly as a result of recent data. "The degree to which a similar 'credibility hike' framework was discussed on the Committee will be notable and imply that the forward path of hikes will be more gradual, consistent with the latest Williams comments," Lyngen says. He adds that he'll also watch for how the FOMC is viewing the balance of risks to its dual mandate, which may provide insight on its appetite to continue hiking "or whether the market could be justified in viewing September's move as truly a one-off hike." ([email protected])0739 ET - With $39 billion in 10-year notes slated for sale, today's Treasury auction will be closely watched to see how eager investors are to scoop up the debt. There were hopeful signs from Tuesday's 3-year auction according to BMO's Ian Lyngen. He called the 3-year auction "well received" compared to the 2-year, 5-year and 7-year auctions last month. Still, he said the modest stop-through of 0.2% left the stop rate at 4.932%--the highest for the sector since 2006. "The stop through ended the streak of five consecutive auction tails, a dynamic that bodes well for the 10-year auction," Lyngen said. "The outright level of yields proved enticing enough to bring in buyers for 3s, perhaps the same outcome will be the case for the 10s." ([email protected])0551 ET - Shares of European semiconductor companies are in the red following a selloff in Asian chip stocks. South Korea's SK Hynix closed 2.8% lower, while Samsung Electronics shed 1.3%. In Europe, shares of Dutch semiconductor-equipment maker ASML Holding and smaller rival ASM International are down 1.7% and 4.4%, respectively. BE Semiconductor Industries, the Dutch supplier of semiconductor assembly equipment, is down 8.2% following a stock rating downgrade from UBS. German chip maker Infineon Technologies stock loses 5%. STMicroelectronics shares are down 3.1%. Meanwhile, the E-mini Nasdaq 100 futures contract is 0.4% lower, pointing to a weak opening for tech stocks in the U.S. ([email protected])0232 ET - Higher policy rates won't derail a U.S. economy driven by a largely rate-insensitive artificial-intelligence capex cycle, says Sylvia Sheng, multi asset solutions lead portfolio manager at J.P. Morgan Asset Management. Financial conditions also remain supportive, with credit spreads still tight and corporate fundamentals remaining healthy, she adds. J.P. Morgan's constructive stance on equities is underpinned by solid nominal growth, low recession risk and a sustained AI capex earnings cycle, she adds. The U.S. remains the asset manager's core overweight as it offers the broadest and most durable exposure to the AI capex and adoption cycle, while earnings momentum has started to broaden beyond the initial AI beneficiaries, she says. J.P. Morgan continues to believe the AI capex build-out has ample room to run. ([email protected]; @ivy_jiahuihuang)