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By Mike Dolan
LONDON, July 22 - What matters in U.S. and global markets today
By Mike Dolan, Editor-At-Large, Finance and Markets
Oil prices, bond yields and chip stocks were rising in sync again overnight, as this renewed round of fighting between the U.S. and Iran entered its eleventh day with no end in sight. But the chip rally stalled in Asia during a volatile session, and Wall Street futures are down as investors await results from Alphabet and Tesla later today.
I’ll get into all that and more below.
But first, check out my midweek column on a few important market stories that aren't in the headlines. This week I zero in on a jobs market puzzle, shifting monetary goal posts and single-stock volatility.
And listen to the latest episode of the Morning Bid daily podcast. Subscribe to hear Reuters journalists discuss the biggest news in markets and finance seven days a week.
ALPHABETTING
Amid the fog of war and market volatility, Japan’s yen is also back on the slide, hitting its weakest level in 40 years above 163 per dollar. The latest yen slip may reflect two things: the fresh surge in crude prices, a major inflationary risk for a big oil importer like Japan, and the resumption of U.S. tariff threats. On the latter, Reuters reported on Tuesday that Japan is seeking to raise dollar financing to increase its investments in America as part of February’s trade truce with Washington. Of the $550 billion promised at the time, only about $2 billion has been earmarked so far.
Needless to say, Tokyo traders are back on edge over the risk of official intervention to support the yen as Finance Minister Katayama warned of it again on Wednesday.
Otherwise, chip stocks were the big movers again overnight. The U.S. SOX chip index jumped back 5% on Tuesday and South Korea’s KOSPI was up by a similar amount earlier following the release of bumper early July trade numbers, but it then gave back most of these gains.
This comes as Alphabet gets set to report its second-quarter earnings, the first of the U.S. Big Tech giants to do so, and the bar to impress will be very high. Reuters analysis shows the four AI hyperscalers will see their capex exceed their operating cash flow by next year, a remarkable shift given that these companies have long been known for printing cash. Tesla is also expected to show that it's back in cash burn mode when it reports today.
The tech stock bounce-back - brief though it was - remains notable, given the tightening of bond markets around the world this week in response to crude oil’s return to a six-week high near $95 per barrel.
There is little sign that we will soon see a resolution in the Iran war, a conflict that has cost the U.S. government more than $37.5 billion already, according to the Pentagon. Now that the high point of summer is in the rearview mirror, fuel storage for the winter is now coming back onto the radar. Goldman Sachs this week said that if there is no resolution to the Gulf conflict soon, crude could hit $120/bbl in the fourth quarter.
Elsewhere, UK markets held steady as new Prime Minister Andy Burnham indicated that he would not tinker with income tax thresholds - which could have cost the government billions - and UK inflation eased back to 2.6% in June.
CHART OF THE DAY
Brent crude oil prices climbed toward $95 per barrel, near a six-week high, as fears of further supply disruptions intensified after U.S. forces struck Iranian military targets for the 11th straight night.
Three oil tankers loaded with Saudi crude for China and India made U-turns in the Red Sea on Tuesday, heading towards the Suez Canal rather than braving the Yemeni coast following a warning from the Iran-aligned Houthi militia. Another front appears to be opening in a re-escalating war, creating concerns about the build-up of winter fuel storage.
TODAY'S EVENTS TO WATCH
* Earnings from Alphabet, Tesla, IBM, Texas Instruments, AT&T, Moody's, CME, ServiceNow, CSX, Philip Morris, Northern Trust
* U.S. Treasury sells 20-year bonds
* Chicago Fed June business survey, Kansas City Fed July manufacturing survey
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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.
(Writing by Mike Dolan)
