Brent remains stable at $88.3 after surpassing $90 for the first time in a month. The Houthi threat of a naval blockade against Saudi Arabia and negotiations with Iran are straining the markets, as the earnings season kicks off with Alphabet, Tesla, Intel, and IBM.
Oil Brent is trading this Monday at $88.3 per barrel, after having surpassed $90 for the first time in over a month. The volatility in crude prices is attributed to the declaration of a naval blockade against Saudi Arabia by the Houthis from Yemen, aligned with Iran, while mediators have conveyed a proposal to Tehran to ease tensions with the United States, according to Reuters.
Investors are closely monitoring events in the Gulf, which have already shaped the agenda in March, April, and May. "The situation in the Gulf was the dominant theme and remains very important, but something deeper is happening," notes Samy Chaar, chief economist at Lombard Odier.
Results from major tech firms: the litmus test for artificial intelligence
This week is crucial for US equity markets. Alphabet, Tesla, Intel, and IBM are presenting their second-quarter results. These results will test the trend of artificial intelligence, which has driven stock market gains this year due to increased capital spending in this area.
The European index STOXX 600 advanced this Monday, boosted by a 0.8% rise in tech stocks. In the United States, Nasdaq 100 futures are up 0.9% and S&P 500 futures are up 0.4%. However, investors are showing signs of unease: the strong rebound of chip manufacturers gave way to a sharp correction last week.
"To secure any supply, money will need to be invested. This translates into capital spending, demand, profits, and broader economic benefits," adds Chaar, who highlights that investors are also watching the efforts of governments and companies to diversify and build alternative supply chains in the medium term.
The fear of inflation resurfaces with rising energy costs
In debt markets, traders are focusing on the impact that the new rise in energy prices has on inflation. Although US consumer price data surprised on the downside last week, futures markets are pricing in at least one rate hike by the Federal Reserve before the year ends.
This Monday, the yield on the 10-year Treasury bond stood at 4.56%, after rising 2 basis points. The yield on 30-year bonds has once again surpassed the psychological barrier of 5.0%, a level that typically diverts funds from equities to fixed income and raises the valuation bar for future corporate profits.
In Europe, money markets anticipate a tighter stance from the European Central Bank, which is seen as likely to raise rates again in September. They are also pricing in an 80% chance of another move before the end of the year. The yield on the German 2-year bond reached a peak of 2.817%, its highest level in two years.
Traders in Europe are also monitoring gas prices, which have reached four-month highs. All this comes in a week where the second-quarter earnings season picks up pace, with particular attention on the major tech firms. For investors, the key is whether corporate profits justify the current high valuations, especially in the tech sector, and how persistent inflation will affect central bank decisions.
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