Written Commentary
MACRO FRAME
Last week’s disinflation narrative is already under attack. A fresh surge in crude oil has forced traders to reassess inflation, rates, and risk assets before the opening bell. Weekend fighting in the Middle East initially sent crude oil sharply higher, lifting Treasury yields and supporting the U.S. dollar. With a light economic calendar, attention now shifts to whether crude stabilizes and to corporate earnings.
STOCK INDEX FUTURES
Last week’s AI-driven selloff has given way to a more balanced market, but buyers have yet to regain control. Geopolitical tensions and higher energy prices briefly pushed investors toward defensive positioning overnight, although crude oil has since reversed lower, easing the pressure that initially challenged risk assets. With little scheduled macro data until Thursday’s flash PMIs, this week will be driven by earnings. Results from Alphabet, Tesla, Intel, GE Vernova, Texas Instruments, and ServiceNow will determine whether investors continue reducing exposure to richly valued AI leaders or view the recent decline as an opportunity to rebuild positions.
CURRENCIES
The dollar enters the week with a modest defensive bid, but conviction remains limited. Weekend geopolitical tensions initially supported traditional safe-haven demand, yet fading oil prices have tempered the inflation fears that drove the early move. At the same time, last week’s softer U.S. inflation data continues to argue against an imminent Federal Reserve rate hike, even as policymakers maintain a hawkish tone. The market remains caught between lower domestic inflation and the possibility that higher energy prices could delay further progress on inflation if Middle East tensions intensify. Relative monetary policy continues to provide support beneath Dollar futures.
TREASURY FUTURES
Treasury futures begin the week under renewed inflation pressure rather than growth concerns. The weekend escalation in the Middle East has revived concerns that the encouraging June CPI report may prove temporary. Bloomberg Economics continues to expect global inflation to rise into year-end under its base case, while acknowledging that a broader disruption in Hormuz would produce a substantially more inflationary outcome. The result is a futures market caught between improving inflation data and deteriorating energy fundamentals. International bond markets reinforce that message. U.S. 10-year yields are hovering near 4.55%, while U.S., Australian, and New Zealand government bonds weakened overnight as traders repriced inflation.
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