By Mike Dolan
Aug 11 (Reuters) –
What matters in U.S. and global markets today
By Mike Dolan, Editor-at-Large, Finance and Markets
With U.S. Treasuries on tenterhooks ahead of tomorrow’s big inflation report, the renewed tightening of energy markets is adding to the tension, with Brent crude trading at nearly $90 a barrel on Tuesday after rising 5% yesterday.
Hopes that the Strait of Hormuz might reopen have been knocked by the U.S. and Iran’s entrenched positions on the terms of any prospective deal.
I’ll get into that and more below.
But first, check out my latest column on Trump’s latest challenge to Federal Reserve independence – and why it’s coming at a nervy time for the bond market.
And listen to the latest episode of the Morning Bid daily podcast, where we discuss Nvidia’s $500 billion AI financing push and more.
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LONG BOND BOTHER
Tehran’s demands that Washington lift sanctions, pay reparations and allow it some control of Hormuz were countered by the White House’s insistence on Monday that Tehran pay compensation of its own and free up all shipping lanes.
Oil markets are bracing for a protracted standoff, adding to persistent inflation worries, nudging bond yields higher and reining in stocks, despite the bumper second-quarter earnings season. At 5.28%, the yield on the 30-year Treasury bond came within a whisker of its highest in almost 20 years.
Adding to Treasury angst in a significant week for bond sales, the Japanese yen weakened past the 159-per-dollar level on Monday and into Tuesday, with Tokyo markets closed today for a holiday. Currency markets are seemingly testing the resolve of U.S. and Japanese authorities to keep propping up the unit after recent historic joint intervention.
Gnawing at the currency are doubts about the Bank of Japan’s willingness to tighten monetary policy significantly to back up the yen-buying. And there are background concerns in the U.S. bond market that a long Japanese campaign of dollar sales could see some liquidation of their giant Treasury holdings.
Elsewhere, U.S. earnings on the slate for Tuesday include AI cloud computing company CoreWeave, which will give another glimpse of the scale of data center demand amid the AI boom.
Meantime, Nvidia said on Monday it was working with six major Wall Street firms to raise some half a trillion dollars’ worth of financing pools to support the AI infrastructure push.
And Intel raised $20 billion from an upsized share offering on Tuesday, with its shares falling 4% on Monday after it announced the sale.
Chart of the day
Japan’s yen weakened again this week, testing the resolve of Japanese and U.S. authorities to keep supporting the currency after the recent historic intervention.
The yen-buying salvo, which amounted to almost $100 billion of dollar sales, squeezed speculative short positions in the yen after they had built up to almost two-year extremes.
Whether speculators feel emboldened to rebuild those short positions is now a big question. Wariness of more intervention abounds, even though Japan’s markets were closed for a holiday on Tuesday.
Today’s events to watch
• U.S. existing home sales (10 a.m. EDT), 3-year note auction (1 p.m. EDT)
• U.S. corporate earnings: CoreWeave
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
(By Mike Dolan)
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