Crude oil falls as talks resume

•   ●  Negotiations set to resume later today
  
•   ●  Brent Crude falls to $84 per barrel
  
•   ●  Non-farm payrolls on Friday

Iran negotiations set to resume

Late on Sunday night, President Trump announced that negotiations with Iran would be given another chance. The announcement follows the cancellation of planned strikes against the Iranian regime, which were called off after a number of US allies in the region, most notably Saudi Arabia, claimed that a peace deal was within reach. Another volatile start to the week, but by now market participants should know better than to relax ahead of the Monday open. Crude oil prices shot down rapidly as the Asian session got underway, with Brent Crude sinking to $84 per barrel from $91 at the end of last week.

Asian markets themselves are on very unstable footing this morning, following a series of dramatic events at the end last week. In a somewhat predictable move, the Bank of Japan seized upon a moment of weakness in the greenback to start aggressively buying Japanese yen to defend its crumbling exchange rate against the dollar. What was not so predictable is that the following day, the New York Fed joined the effort by offloading a portion of its euro reserves in order to purchase what sleuths believe to be $5-10 billion worth of yen. The BoJ itself is believed to have spent almost $55 billion as part of the effort, making the intervention the largest in Tokyo’s history. The respective central banks have not coordinated to such an extent for 15 years. Meanwhile, over in South Korea, traders are coming to terms with the fact that the Kospi index suffered a 22% loss in July, largely as a result of dangerous amounts of leverage that continue to infect the local stock market. Coupled with the developments surrounding Iran, regional markets have no idea which way to go.

Swings and roundabouts for the Magnificent Seven

Last week was a big one for the earnings calendar, with no fewer than four of the magnificent seven submitting their latest financial reports. To say the results were a mixed bad would be an understatement. Microsoft (MSFT) was one of the clear winners, rising 22% over the course of the week after smashing expectations and recording its biggest one-day gain in the company’s history. Microsoft, along with everyone else, is still spending outrageous amounts of cash on AI infrastructure, but unlike other household names, has proven that such capital allocation is successfully translating into increased revenue. Amazon (AMZN) also emerged victorious last week, for essentially the same reason. Despite raising capital expenditure forecasts to an eye-watering $220 billion this year, Wall Street quickly forgave the online giant after it turned out that AWS revenue and operating income had both exploded higher. Amazon finished the week 17% higher as a result. That’s where the good news ended. Meta Platforms (META) had fallen 6.5% by Friday after investors collectively threw up their arms in frustration at the company’s ludicrous spending habits. The company behind Facebook is almost completely reliant on ad revenue to make money, making the obscene data centre build out costs somewhat harder to justify. Matters were made worse by unexpected legal fees and severance packages, together amounting to several billion dollars. Apple (AAPL) finally flew too close to the sun last week, plummeting over 7% after having escaped most of the market drama so far this year. Unlike its peers, Apple was penalised for not doing enough on the AI side. The company blamed a shortage of memory chips that is severely straining its supply chains, with no apparent solution in sight.

The week ahead

A very minor gap in liquidity may be expected today, with Ireland and Canada both closed for business; the only other element of note is the July ISM manufacturing PMI later in the day. While last week saw the publication of the latest PCE price index, giving the Fed the latest pulse on inflation in the United States, this week will complete the picture with the current state of the labour market, starting with the latest JOLT survey tomorrow. The ADP employment change follows on Wednesday, before the weekly jobless claims fill the gap on Thursday, finally paving the way for non-farm payrolls on Friday. Economists are predicting 91k new jobs in July, a rebound from the prior month’s disappointing figures. The earnings calendar returns to standby mode this week, with the exception of the beleaguered space exploration company SpaceX (SPCX), which reports after the bell on Tuesday. Shares closed at a new record low of $108 last Friday – a drawdown of over 50% from the highs established back in mid-June. Iran is likely to dominate events today and throughout the rest of the week, but there is also a good chance that markets have not heard the last about potential interventions on the yen.

#IRAN #PEACE #TRUMP

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About the Author

Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.

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