US Market Open: Stocks hit with NQ -1.3% as Oil and Yields weigh on the risk tone

Iranian Parliamentary Speaker Ghalibaf said the Strait of Hormuz will not open until the blockade and oil embargo are lifted.
Global equities trade on the softer side, driven by the upside in bond yields (US 30yr 5.32%).
DXY continues to rebound, GBP lower despite mixed jobs/wages data.
Energy benchmarks rangebound; record copper prices boost BHP earnings.
Looking ahead, highlights include US ADP Employment Change Weekly, Import/Export Prices (Jul), Housing Starts (Jul), Industrial/Manufacturing Production (Jul), Atlanta Fed GDP (Q3). Comments from ECB's Lane. Earnings from Home Depot.

As of 10:25BST / 05:25EDT

EUROPEAN TRADE

EQUITIES

European bourses are softer across the board, with the recent bond selloff causing risk aversion. Persisting inflationary pressures, increased government spending and shifting investor demographics are hitting bonds globally. Political uncertainty, especially in the US ahead of the midterms, is also putting pressure on bonds. Its impact on equities is that higher yields would weigh on profits as it would require larger payouts. Higher yields would also mean higher discount stock valuations.
Sectors highlight the negative bias. Retail and Energy are the only sectors posting decent gains while Tech, Industrial Goods & Services and Basic Resources are the sector laggards.
US equity futures have been hit, given the higher bond yields. Newsflow has been light, but focus will be on miners after BHP reported full-year profit beat expectations and the miner lifted its dividend to a four-year high, driven by record copper prices and stronger copper earnings that overtook iron ore as its biggest profit contributor.
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FX

DXY is modestly firmer today with headline catalysts light; the latest reporting optimistic from Pakistan but not reflected by Iran and the US. All-in-all, the market is viewing the latest updates as both sides in stalemate, and with Hormuz traffic low oil it looks like Crude could stay elevated and continue to weigh on the risk tone. Absent tier-1 data and headlines should keep focus on yield moves with US supply tomorrow potentially the most expensive for the Treasury in 25 years. DXY is within a narrow 99.52-99.69 range.
UK Jobs: The strong wage figures were caveated by a 6.1% rise in public sector pay helped by NHS pay awards, while the unemployment rate unexpectedly remained at the prior 4.9% level (exp. 4.8%) and the 3M employment change printed below the prior; sparking a modest dovish reaction with Cable falling 15 pips; action which has persisted two hours later. Now, Wednesday’s CPI is in focus, and with GBP having had a strong run vs. the USD, it could see a decent move should figures rise at a slower than expected pace.
Action elsewhere is quiet. NZD dipped below 0.59 to a 0.5870 trough amid the risk tone, USD/JPY looks towards 160.00 as oil prices hit its terms of trade, action which also fails to help energy exporters NOK and CAD, the latter which is flat against the USD, while NOK is weaker against the Buck (USD/NOK +0.2%), but firmer vs. SEK after it strengthened on Monday.

FIXED INCOME

Global fixed benchmarks continue to move lower, in a continuation of the action seen last week. Yields continue to trudge higher; the steepening seen in the last few sessions appears to have taken a breather this morning, with yields across the curve moving higher to a similar magnitude.
Yields continue to hold at multi-decade highs; the US 30yr (5.32%) sits at levels not seen since 11 June 2007, with the next peak going back to 2004 (5.53%). As for the yield spread, the US2s30s continues to widen, now at 113bps (vs 98bps at the start of the month). To remind, front-end rates were pressured after recent soft US data which led to a dovish Fed repricing, whilst long-end rates have been impacted by fiscal/geopolitical/political uncertainty.
USTs (-3 ticks) are off by a handful of ticks and trade within a 108-10 to 108-15+ range. Domestic newsflow has been light this morning, and will likely remain so for the remainder of the day given the lack of Tier 1 data and the summer lull. Bunds (-35 ticks) and Gilts (-30 ticks) also follow the bearish tone, but UK paper has its own data to digest this morning.
Overall, the UK’s jobs data doesn't show a significant change in the labour market, a point that was expected heading into the release. Initial focus on the hotter-than-expected wage metrics, including the upward revision to the measure with bonuses. Additionally, the claimant count unexpectedly declined and the prior was revised down. However, this is offset by the unemployment rate unexpectedly remaining at the prior 4.9% level (exp. 4.8%) and the 3M employment change printing below the prior.
The UK sells GBP 4bln 4.875% 2036 Gilt: b/c 3.65x (prev. 3.13x), average yield 5.155% (prev. 5.040%), tail 0.1bps (prev. 0.1bps).
Japan sells JPY 1.9tln 5-year JGBs; b/c 4.15x (prev. 3.43x), average yield 2.020% (prev. 2.163%), tail in price 0.02 (prev. 0.03).

COMMODITIES

WTI and Brent Oct futures hold a positive bias as constructive geopolitical headlines are trumped by escalatory rhetoric (see below). WTI trades towards the upper end of USD 84.64-85.68/bbl after topping yesterday’s USD 85.04/bbl high (vs low 81.50/bbl). Brent eyes USD 92/bbl in a current USD 90.64-91.85/bbl range after notching a USD 88.01-91.21/bbl range yesterday. Dutch TTF resides around recent ranges with gains of some 1.5% intraday, testing EUR 63/MWh to the upside in recent trade.
Metals are subdued as elevated energy prices keep the USD underpinned and thus weigh on the complex. Spot gold pulled back to around USD 4,400/oz and earlier hit lows close to its 100 DMA (USD 4,385/oz) in a USD 4,386-4,436/oz intraday range at the time of writing. Spot silver remains within yesterday’s USD 64.75-66.56/oz range. Base metals are lower across the board. 3M LME copper tested support around the 14k/t mark this morning to trade in a current USD 13,996.18- 14,174.00/t range at the time of writing.
In terms of the main geopolitical updates, US President Trump reiterated that the US remains in control of the Strait of Hormuz and said Iran wants to reach a deal, although he does not believe Tehran will agree to the terms, he considers necessary and stressed that he is not seeking an extension of the Iran MoU. Trump also criticized US-ally Oman, saying he does not think the country “behaves very well” and that the US could handle it very easily. Meanwhile, Pakistani journalist Anas Malick reported that an understanding to extend the US-Iran ceasefire under the Islamabad MoU has been reached and agreed in principle. Separately, UKMTO reported an incident in the Strait of Hormuz in which a vessel conducting an outbound transit was struck by an unknown projectile. This morning, Houthi rebels said they used multiple drones to attack an Aramco refinery in Saudi Arabia's Jazan region, although it is unclear if this is referring to a fresh attack or last week’s attack.
Libya is seeking investment of up to USD 40bln to develop oil resources, according to FT.
India is reportedly considering cutting its 100% tax on imported sugar to help curb domestic prices, according to Bloomberg.

TRADE/TARIFFS

US President Trump and Canadian PM Carney spoke late on Monday after several days of trade negotiations between the countries, according to a Bloomberg reporter citing sources.

NOTABLE EUROPEAN DATA RECAP

UK Unemployment Rate (Jun) 4.9% vs. Exp. 4.8% (Prev. 4.9%).
UK Employment Change (Jun) 83k (Prev. 147k).
UK Average Earnings excl. Bonus (Jun 3MYr) 3.5% vs. Exp. 3.4% (Prev. 3.4%).
UK Average Earnings incl. Bonus (Jun 3MYr) 4.1% vs. Exp. 4.1% (Prev. 4.4%).
UK Claimant Count Change (Jul) -11.0k vs. Exp. 11.2k (Prev. -6.4k).
UK HMRC Payrolls Change (Jul) -13k (Prev. -13k).
German ZEW Economic Sentiment Index (Aug) 34.2 vs. Exp. 30 (Prev. 26.3).
German ZEW Current Conditions (Aug) -61.1 vs. Exp. -68.8 (Prev. -77.6).
European ZEW Economic Sentiment Index (Aug) 31.4 vs. Exp. 25.4 (Prev. 23.4).

CENTRAL BANKS

ECB's Lane said inflation will hover around 3% for the rest of the year but it depends on whether there is a resolution to the crisis. Lane added that food inflation is relatively low.

GEOPOLITICS

MIDDLE EAST

Iranian Parliamentary Speaker Ghalibaf said the Strait of Hormuz will not open until the blockade and oil embargo are lifted. He added that "Iran is ready to inflict a heavier defeat on the enemy than before, in proportion to his actions and encroachments."
UKMTO said it received a report of an incident in the Strait of Hormuz, where a vessel was struck by an unknown projectile while conducting an outbound transit of the Strait of Hormuz, causing damage to the engine room and crew casualty
Yemen's Houthis attacked Saudi Aramco's Jazan refinery with drones, according to Saba news citing sources.
Airstrikes targeted the Abu al-Duhur military airport in eastern Idlib countryside, Syria, with a Jerusalem Post stating that Israeli fighter jets were responsible for the attack on the Abu al-Duhur Airbase in northwest Syria. There were also reports of Israeli warplanes targeted the areas of Mansouri and Deir Saryan in southern Lebanon, while Lebanese media reported intermittent Israeli shelling on the high ground of Jabal al-Rafie on the outskirts of Nabatieh al-Fawqa in southern Lebanon.
An explosion was reported at the Shaddadi gas pipeline in the outskirts of Hasakah, Syria.
UAE's Foreign Minister discussed the latest regional developments in a phone call with the Kuwaiti Foreign Minister.
COSCO Shipping (1919 HK) and CMES have reportedly stopped sending oil tankers through the Strait of Hormuz and Bab al-Mandeb, sources suggest.
Saudi Aramco resumed oil loadings from inside the Strait of Hormuz last week, Reuters reported.

RUSSIA-UKRAINE

Moscow mayor said Russia shot down 180 drones in the Moscow region overnight.
Western diplomatic source said an increasing number of European politicians are advocating for a resumption of dialogue with Russia, TASS reported.

OTHER

Russian Foreign Minister Lavrov said Russia and North Korea are fighting to establish a new, righteous world order, according to KCNA.

CRYPTO

Bitcoin pares back some of Monday's gains but holds firmly above the 20- and 50-SMAs at USD 63.8k, currently beyond the USD 64k level.

APAC TRADE

APAC stocks mostly declined following the weak lead from Wall Street, where all major indices declined amid higher oil prices and yields due to ongoing geopolitical uncertainty following the expiry of the US-Iran MoU and with Trump rejecting a truce extension, while he also threatened to bomb US ally Oman.
ASX 200 eked out slight gains amid a slew of earnings, as results from BHP and CSL helped keep the index afloat, although gains were capped by weakness in telecoms, financials and the consumer sectors.
Nikkei 225 retreated beneath the 68,000 level with underperformance in Japan amid upside in yields, higher oil prices, fears of a faster pace of BoJ rate hikes, and the recent weak GDP data.
KOSPI initially rallied on return from the long weekend, but then faltered as the early tech resilience waned, and with some suggesting that US President Trump's decision to reduce military drills with South Korea could partly be due to frustration regarding the pace of South Korea's investment pledge.
Hang Seng and Shanghai Comp were subdued following the recent disappointing economic data, in which Industrial Production and Retail Sales missed forecasts, although the downside in the mainland was somewhat cushioned after China's MOFCOM and eight other ministries announced measures to boost consumption in lower-tier cities and counties.

NOTABLE ASIA-PAC HEADLINES

China’s Ministry of Commerce and eight other ministries issued guidance aimed at boosting consumption in lower-tier cities and counties, with fiscal support a key focus. Measures include upgrading retail channels, encouraging new consumption formats, improving local service efficiency and expanding eldercare, childcare, education, healthcare and sports facilities, while eligible personal consumer loans and loans to service-sector operators may receive fiscal interest subsidies.
PBoC plans to expand Yuan offshore market and is backing the creation of a new model for real estate developments, adding they will intensify review of macroeconomic and financial efforts.

NOTABLE APAC DATA RECAP

Australian Westpac Consumer Confidence Index (Aug) 88.9 (Prev. 83.9).