Daily Summary: Indices Pull Back Under Pressure from Oil Prices

USA

• Thursday’s session on Wall Street unfolded in a pessimistic mood, though without sharp price swings. Declines of up to about 1.2% on the major indices were pared back later in the session. The Russell led losses, with its futures down about 0.9%. US100 followed. US30 and US500 are holding up better, with losses reduced to around 0.6%. This behavior implies a move away from risk in response to rising inflation expectations.
• A potentially high impact item, though still with a low implied probability, is the reported “dividend” that the D. Trump administration is said to plan to pay to “all adult Americans” if the Republican Party wins the midterm elections. The figure mentioned was USD 5,000.
• The Houthi group has taken control of a significant portion of the coastline. The market is reacting negatively to this news, fearing a resumption of attacks on ships in the Red Sea.
• US 10-year Treasury yields are moving very close to the psychological 5% level (currently around 4.92%). Such a high level could provoke renewed intervention by the Treasury Department and/or the Fed.

Company news, USA:

• Amazon (AMZN.US): One of the key players in e-commerce and AI announced an expanded partnership with OpenAI and integration with ChatGPT. According to a Bloomberg report, Amazon’s advertising algorithms will now be able to direct personalized content to users of the OpenAI platform.
• Coinbase (COIN.US): Morgan Stanley published a report on the company’s valuation, pointing to a number of complex issues and the company’s outlook. Despite the positive tone, the stock is down about 1%.
• Oracle (ORCL.US): The company will report results after today’s session closes. Analyst consensus expects EPS to fall to about $1.75 in the last quarter, and revenue to decline to around $19.15 billion. The stock is down about 3% ahead of the release.
• Blackstone (BX.US): The firm acquired a majority stake in Sanha Logistics Park II, a dry logistics facility in South Korea. The investment is expected to be completed in 2028, cover 334,000 square meters, and cost about $450 million in total. The stock is down about 2%.
• Apple (AAPL.US): The company unveiled its new product, a foldable iPhone model. This is the first such presentation under the new CEO. The model is priced at $1,999. The stock is up about 2%.
• Rocket Lab (RCKT.US): Space companies are continuing yesterday’s gains, driven mainly by Rocket Lab’s presentation of a new generation of orbital solar cells. The stock is up about 1.5%.

Macroeconomic data, USA

• The report on initial jobless claims showed a decline to 206k versus expectations of 205k.
• US PPI rose year over year above expectations to 5.4% (expected 5.3%). The monthly increase was 0.4%. Core producer prices rose 4.6% year over year and 0.2% month over month.
• Existing home sales in the US fell to 3.98 million in August, a 2% month-over-month decline. The reading matched expectations.
• The EIA report on changes in crude oil and distillate inventories surprised with strong supply.
  • Crude oil inventories: -0.39M (Expected: -1.3M; Previous: -4.45M)
  • Gasoline inventories: +1.27M (Expected: -1.3M; Previous: -1.17M)
  • Distillate inventories: +2.09M (Expected: -0.2M; Previous: +0.8M)

Europe

• European indices are extending the correction. Despite pressure from oil and gas prices, the pullback remains relatively shallow. Most European indices are still only a few percent below record highs. Today, the main indices in Europe are falling, but keeping losses below 1%. The Dutch and German indices are the laggards, with futures down about 0.7%.

Company news, Europe

• Associated British Foods (ABF.UK): The British food conglomerate is plunging about 10% in response to weak results for the last quarter from one of its subsidiaries.
• D’Ieteren: The Belgian manufacturer and distributor of auto parts is up 5% after appointing a new CEO.
• Volkswagen (VOW1.DE): Reuters reports that the full restructuring plan is to cover 60,000 jobs globally and cost about EUR 10 billion.
• Hemnet: The Swedish real estate marketplace platform has halted its share buyback program. The stock price fell about 5%.

Macroeconomic data, Europe

• The European Central Bank raised interest rates in line with market expectations. The refinancing rate increases to 2.65% and the deposit rate rises to 2.5%. The futures market is currently pricing in about 75 bps of additional hikes over the next 12 months.
• German CPI matched expectations at 2.9% year over year and 0.2% month over month. The growth rate clearly slowed versus last month’s reading of 0.8%.
• Industrial production in Spain rose 2.3% year over year.
• Inflation in the Czech Republic increased to 1.9% year over year, in line with market expectations.

Forex

• NZD, CHF, JPY, and AUD are down about 0.5% versus the USD. The declines follow rising inflation expectations and the higher interest rates that come with them. The euro remains stronger than most of the currency basket (about 0.3%), but is slightly weaker versus the USD.

Commodities

• Rising tensions in the Middle East and the risk of shipping disruption through the Red Sea are pushing oil prices back to levels not seen for many months. Near the end of the US session, Brent is at USD 107 per barrel. European gas is up 3% and moves above EUR 81.
• Concerns about interest rates and investment are forcing a sell-off in industrial metals. Copper is down about 4% from its peak.
• Some precious metals with industrial uses are also falling. Silver, platinum, and palladium are down about 5% and are performing much worse than gold.

Crypto

• The significant deterioration in risk sentiment is weighing on the crypto market, where declines are visible across most assets today.
  • Bitcoin is down about 1% to around USD 77,200.
  • Ethereum is up about 0.3% and remains near USD 2,465.
  • Solana is down 2% and falls below USD 100.