Oil swings between $87 and $90 as Mideast headlines drive the session. US CPI at 8:30 a.m. ET is the next catalyst for rates, dollar and risk appetite.
Brent crude briefly climbed above $90 a barrel yesterday before a Pakistan comment suggesting a US-Iran deal was close sent it back toward $87. Overnight those gains reversed again. A suspected Houthi attack in the Bab el-Mandeb Strait and a US strike on a vessel in the Gulf of Oman pushed Brent back toward $90, where it trades this morning.
Oil is the session's dominant cross-asset vector. Equities took a direct hit yesterday, with the S&P 500 falling 0.3% and the Nasdaq dropping 0.6%. Energy was the only sector in the green. Communication services lagged, dragged by Alphabet. Early optimism after the Pakistan-Iran deal hint briefly lifted US futures 0.2% before the open, traders said. The mood faded as Iran reiterated the strait would stay closed and Trump maintained a hardline stance.
The next piece of the macro puzzle arrives at 8:30 a.m. ET. The US July CPI print is forecast at 0.2% month-on-month for headline and 3.4% year-on-year, after June's softer-than-expected 0.0% monthly reading. Core inflation is seen at 0.2% m/m, 2.5% y/y. The June data came in broadly below consensus, and markets are debating whether that marked the start of a trend or a one-off. The rest of the calendar is light: final headline inflation from Germany and Italy, plus Norwegian consumer confidence.
In fixed income and FX, major crosses were relatively steady yesterday. The Swedish krona and Japanese yen lost a little ground. The dollar recovered some lost turf. The Norwegian krone got a lift from elevated oil prices. Bond yields fell across the curve following the equity declines.
The NFIB Small Business Optimism Index rose 2.4 points to 99.8 in July. Labour-market indicators within the survey strengthened, with more firms reporting unfilled job openings and three-month hiring and capex plans rising. That contrasted with actual employment changes, which remained low and in line with last week's payrolls data. Quality of labour was the most frequently cited "single most important problem." The implied story: forward-looking indicators are improving despite soft realised data. The NFIB report is due at 8:30 a.m. ET.
Overnight, Asian equities and US futures are mostly in green.
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