Oil Extends Rally With Iranian Demands Delaying Hormuz Deal — Market Talk

1455 ET - Oil futures post gains as Iran's latest demands on the U.S., including a military withdrawal, unfreezing of Iranian assets and payment of reparations, are seen prolonging the closure of the Strait of Hormuz. "This list of demands seems more like a child's wish list to Santa Claus than anything grounded in reality," Phil Flynn of the Price Futures Group says in a note. While Iran tries to give the impression it's calling the shots, lower oil prices at the back of the curve suggest the market is unconvinced the strait will be a lasting problem, he adds. "The near-term risk is tight diesel and heating oil supplies heading into winter." WTI settles up 5.1% at $82.13 a barrel, and Brent rises 5% to $87.72. ([email protected])1357 ET - Canada's two biggest provinces, Ontario and Quebec, would sustain the biggest economic blows from the Trump administration's planned 50% tariff on certain Canadian goods beginning Aug. 19, says Michael Davenport of Oxford Economics. Canadian officials are in talks with Washington about averting this new duty, which targets about $20 billion of Canadian goods ranging from cement, paper and wood products, and chemicals. Davenport says the new hefty duty would weigh on growth in Ontario and Quebec, given the concentration of targeted sectors in those two central Canadian provinces. Also taking a relatively big hit is New Brunswick, which is represented in parliament by Dominic LeBlanc, the minister in charge of US-Canada trade. All three of those provinces have imposed bans on US alcohol sales. ([email protected]; @paulvieira)1349 ET - Treasury yields and the dollar keep rising as markets see nearly equal chances of a Fed hike or hold in September. The dollar strengthens nearly 1% against the yen, despite officials' efforts to prop up the Japanese currency. The lasting U.S.-Iran standoff over the Strait of Hormuz pushes Brent crude up 4% to $87, rekindling inflation fears that could bolster the case for an interest rate increase. The 10-year yield reaches 4.701% and the two-year is at 4.239%. The WSJ Dollar Index rises 0.2%. ([email protected]; @ptrevisani)1319 ET - Businesses are likely to continue pulling forward their spending on servers and storage arrays for at least a couple of years, Morgan Stanley analysts write in a note upgrading HPE, formerly known as Hewlett Packard Enterprise, to overweight. While accelerated enterprise spending won't last forever, and investors should be cautious as estimate revisions hit their peaks, Morgan Stanley's checks, surveys and analysis indicate "an infrastructure cycle that is proving both stronger and more durable than we previously anticipated," the analysts write. "While execution remains the key risk, we believe HPE now offers the best combination of earnings upside, valuation support and re-rating potential within our enterprise infrastructure OEM group." Shares gain 3.7% to extend this year's gain to 130%. ([email protected])1310 ET - Bitcoin accounted for just under 43% of the total volume traded in the cryptocurrency market in the month of July, says Cex.io in a note. That's the largest share bitcoin has taken of cryptocurrency volumes since early 2023, says the firm. "Historically, bitcoin's trading dominance tends to rise during the later stages of bear markets as investors rotate from altcoins into the relative safety of BTC," says Cex.io. The total market capitalization of the cryptocurrency market is at $2.19 trillion as of today, according to data from CoinMarketCap. That's down $10 billion over the past 30 days. ([email protected])1223 ET - Gold futures are up in trading Monday with the most-active contract climbing 0.4% to $4,418 a troy ounce. Gold is managing to bounce back after briefly dipping below the $4k a troy ounce mark briefly. Gold remains well off of the all-time highs seen in late-January, when the continuous contract set a new record high of $5,354.80 a troy ounce. "Any real progress toward reopening the Strait [of Hormuz] could extend this pullback toward $4,300 support, but another flare-up sends gold straight back toward record territory," says Waleed Said at GivTrade. Silver rises 2.9% to $66.085 a troy ounce. ([email protected])1157 ET - Apple raised the trade-in value of iPhone 15 and 16 models last week across key markets, Jefferies analysts say in a research note. Some media outlets including Mac Rumors saw the increase as a sign that price hikes were imminent for iPhone 17. But Jefferies analysts point out that Apple also dropped the trade-in price for certain models in China. "As trade-in prices are a monthly negotiated agreement between Apple and appointed dealers in each region, it may not have any implication for new iPhone selling prices," they write. "A higher trade-in value in the U.S. could drive stronger demand for the iPhone 17, but create more pressure on iPhone 18 sales given limited feature upgrades but assumed mid-teen % price hikes." Jefferies downgrades the stock to underperform from hold, cuts its price target to $263.66 from $285.56. Apple shares down 2% at midday. ([email protected])1110 ET - Higher taxes worth up to 0.8% of GDP may do the heavy lifting in funding U.K. Prime Minister Andy Burnham's policy ambitions, given markets are unlikely to tolerate big increases in borrowing and his party's lawmakers to stomach big spending cuts, Capital Economics' Ruth Gregory says. Burnham has committed to sticking to manifesto commitments, but that doesn't mean he is out of options. He could change taxes that haven't been ruled out, create new taxes, or increase the size of the tax base, she says. But notably the budget this year will likely tilt away from hikes on businesses seen in recent years towards tax hikes on capital, wealth and income. Last year's budget hiked taxes by 0.9% of GDP, Gregory notes. ([email protected])1037 ET - Yields on U.K. and eurozone government bonds rise as oil prices advance due to lack of progress in U.S.-Iran peace talks. The lack of a resolution to the Middle East conflict is pushing up oil prices, Charles Schwab strategist Joe Mazzola says in a note. Investors are concerned about the risk of prolonged oil supply disruptions which could push inflation higher. The price of Brent crude rises 2.6% to $85.72. Ten-year gilt yields rise more than 6 basis points to a 6-day high of 4.988%, LSEG data show. The ten-year Bund yield rises 4.2 bps to 3.173%. ([email protected])1027 ET - Geopolitical and inflation concerns cause markets to fully price in the prospects of the Bank of England increasing interest rates twice by the end of 2027. Investors are pricing in a total of 53 basis points of BOE rate increases by December 2027, LSEG data show. "Given the risks posed by fluctuating energy prices, extreme weather and AI-related pressures, the risks to the inflation outlook remain firmly to the upside," Daiwa Capital Markets Research team says in a note. ([email protected])1017 ET - Sterling's gains following a positive U.K. jobs survey could prove limited given the Bank of England could refrain from raising interest rates, Monex Europe analysts say in a note. The survey by the Recruitment and Employment Confederation and ⁠KPMG showed an improvement in permanent job placements in July while starting salaries rose at a faster pace. "Even so, we doubt survey data shifts the dial before [the BOE's policy decision on September 17], with no change in Bank Rate still overwhelmingly favored." The euro falls to a 10-day low of 0.8541 pounds. Sterling rises 0.2% to $1.3512. ([email protected])0948 ET - The Hungarian forint has scope to recover in the near term before long-term challenges start to weigh on the currency again, Commerzbank's Tatha Ghose says in a note. The currency has fallen recently as the Middle East conflict hits risk sentiment. If the risk backdrop stabilizes, the forint could recover somewhat, he says. "Later, however, the familiar constraints will return." Hungary's slow trend growth will be hard to address while the country's real interest rate adjusted for inflation could narrow as the central bank cuts rates and underlying inflation stops easing, he says. Commerzbank expects the euro to fall to 350-355 forints in coming months before rising towards 375 by December 2027. The euro rises 0.9% to 364.04 forints. ([email protected])