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Donald Trump’s speech at the UN seems to have poured cold waters on any hopes of a deal. Crude oil, the US dollar and bond yields all bounced back from their lows, causing fresh pressure on foreign currencies, European indices and to a lesser degree precious metals.
The DAX has opened significantly higher following the Federal Reserve's delivery of its first interest rate hike since 2023. Although the Fed signaled further tightening, the market reaction was surprisingly positive, as much of the hawkish expectation had already been priced in. Attention now shifts to the 25,900–26,000 point range, which will likely determine whether the current recovery evolves into a new upward wave or remains merely a short-covering rally.
The DAX correction now has little to do with corporate news. Rising oil prices, higher bond yields, and the prospect of further interest rate hikes are dominating market activity. Following the strong US PPI report, all focus is now on today's US CPI. The figures could determine whether the current risk-off phase continues or whether the markets can launch a short-term relief rally.
US equity index futures surrendered an earlier midday bounce in London, as investors struggled to look past an increasingly uncomfortable macro backdrop. Higher oil prices and rising government bond yields are combining to put renewed pressure on risk assets, while the absence of a clear catalyst for improvement makes it difficult to see why investors would materially increase equity exposure at current levels.
Earnings season has taken a back seat for now. Instead, rising oil prices, higher bond yields, and renewed inflation concerns are shaping market sentiment. Brent crude is trading above $100 per barrel again, while the ECB is poised for another interest rate hike. Investors are now focusing on Christine Lagarde's press conference and today's US producer prices for clues about the future direction of interest rates on both sides of the Atlantic.
The ECB’s decision on Thursday comes between two important US inflation releases, leaving EUR/USD forecast exposed to developments on both sides of the Atlantic, as well as the situation in the Strait of Hormuz.
U.S. 10-year and 30-year bond yields have moved higher as markets reopen after the Labor Day weekend, with the producer price index and the consumer price index landing within days of each other. The European Central Bank decision sits between them, where the economic projections and Christine Lagarde's press conference carry more market risk than the rate move itself. The DAX has also broken below its 21-day exponential moving average, a sign that momentum beneath a resilient index is starting to fade.
Following a weak handover from Asia, European markets and US indices were under pressure this morning, as rising oil prices and elevated bond yields once again weighed on risk appetite. Among the major European indices, the German DAX will be in firm focus this week, with the ECB’s rate decision coming up on Thursday. That decision is likely to be a hike, as rising oil prices threaten to re-accelerate inflation.
The DAX has fallen for three consecutive sessions after reaching a record high on 28 August. Rising oil prices and Bund yields are now challenging the rally, while German business confidence and manufacturing data offer a more constructive signal for the domestic economy.
Crude oil prices are rallying as renewed U.S. and Iran strikes push supply risk back to the front of the market.
Oil prices have surged for a second consecutive day, after the US and Iran traded strikes for the first time in two weeks and re-escalated the tensions. WTI oil was climbing to one-month highs and threatening to break above a key bearish trend line, at the time of writing. The latest leg higher is being driven primarily by the renewed escalation in tensions between the US and Iran, with traders ignoring the controversial US-Venezuela deal for now
The FTSE 100 enters the final trading session of August after falling 0.8% on Thursday. Oil, gilt yields and sterling remain critical for the index, but the bigger question is whether investors are underestimating the impact of global rate expectations as September approaches.
The DAX starts close to its record high. Nvidia, interest rates, oil and Jackson Hole are driving trading. Next week, inflation, PMIs and the US labor market will take center stage.
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