Away from equities, FX markets garnered some attention as the yen crept back toward the all-important 160-per-dollar mark – a level that has previously prompted the government to intervene to prop up the currency. Given that authorities reportedly spent more than $73 billion only a few weeks ago in yen-buying efforts, is that strategy failing? Not necessarily.
Over in commodities, the focus remains, of course, on the stop-and-start peace negotiations between the U.S. and Iran.
Oil closed up more than 4% on Monday following Iranian reports that peace talks had been halted, though the U.S. later disputed this claim. Brent crude otherwise remained rangebound below $100 per barrel, moving with the headlines as military strikes continued in the Gulf.
The latest ceasefire between Israel and Lebanon also appeared on shaky ground, after Hezbollah – the Iranian-backed militant group that Israel is actually fighting – said on Thursday that it would not abide by the terms.
Markets remained relatively unfazed by the flare-ups, even as the risk of a major energy crunch intensified amid rapid drawdowns of global inventories. On that front, U.S. gasoline stockpiles have fallen at a near-record pace just as summer demand is set to rise.
On the other hand, China continues to serve as a balancing force in the global energy market. Its seaborne imports of crude oil slumped to the lowest in almost 10 years in May, helping Asia adjust to the loss of at least 10 million barrels per day of crude from the blockades of the Strait of Hormuz. But the question is: how long can that last?
Amid all this, though, more oil appears to be quietly making its way out of the embattled strait, with indications that a growing number of ships are transiting the waterway "under the radar" of satellite tracking systems.
But far from signalling a slow return to normalcy, these stealth flows could be a preview of the opaque energy market the Iran war is likely to leave in its wake.
Back stateside, this was a big week for U.S. employment data.
Tuesday's JOLTS report showed that job openings rose by the most in five years in April, while private-sector payrolls on Wednesday posted a forecast-beating rise of 122,000 for May.
However, initial weekly jobless claims unexpectedly rose 6.1%, and layoffs announced by U.S. corporations jumped 11% in May, according to a report from Challenger, Gray & Christmas, with almost 40% of those layoffs attributed to AI.
The spotlight is now on the May nonfarm payrolls report due out on Friday. A forecast net increase of 85,000 jobs there would be a bumper result compared with the more pessimistic scenarios predicted earlier in the year.
This mixed picture could create headaches for new Federal Reserve Chair Kevin Warsh ahead of the central bank's meeting later this month. The path he takes may not be the one many had previously assumed – particularly given the ongoing inflation pressures.
And it's not only the Iran-driven energy squeeze that threatens to push up prices globally. While AI may prove disinflationary over time, the capex blitz currently appears primed to put upward pressure on inflation in the short term.
It could be a hot summer in more ways than one.
For more data-driven insights on markets and commodities, check out Reuters Open Interest. You can learn:
