Stocks hit and oil chops amid mixed geopolitics - Newsquawk US Market Wrap

• SNAPSHOT: Equities down, Treasuries down, Crude up, Dollar up, Gold down.
• REAR VIEW: Iran reportedly agreed to halt enrichment in exchange for easing US sanctions, but reports suggest the chance of an agreement is extremely slim; Reports published by some news outlets about Iran showing flexibility over its nuclear position are claimed to be false; Trump rejects Iran's seven-day peace deal to reopen Hormuz; Saudi Arabia's East-West pipeline resumed oil exports; Japanese FX Official Mimura jawbones; NVDA raises share buyback program by USD 150bln.
• COMING UP: Data: Spanish Inflation (Sep), Retail Sales (Aug), EZ Economic Sentiment (Sep), US JOLTS (Aug). Events: RBA Policy Announcement. Speakers: RBA’s Bullock; ECB’s Cipollone, Lagarde, Vujcic, Lane; Fed’s Goolsbee, Williams, Bowman, Barr, Waller; BoC’s Gravelle; BoE's Taylor, Mann. Supply: Japan, UK, Italy. Earnings: Micron.
• WEEK IN FOCUS: US NFP, PCE, and ISM Manufacturing PMI, RBA, and EZ CPI. Click here for the full report.
• WEEKLY US EARNINGS ESTIMATES: MU, ACN, NKE, and more to report next week. Click here for the full report.

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MARKET WRAP

Stocks finished lower on Monday, with the Nasdaq underperforming as major indices fell around 0.6-1.1%, while the equal-weight S&P declined 0.6%. Sectors were predominantly lower, led by Communication Services, Consumer Discretionary and Financials, while Staples, Health Care and Energy were the only sectors to finish higher.

Treasuries sold off across the curve, with yields rising around 7-9bps amid choppy US-Iran headlines. Yields pared from highs alongside crude as reports suggested potential progress towards sanctions relief and a nuclear agreement, although subsequent reports said the chances of a deal remain extremely slim. Thereafter, Press TV said reports of Iranian flexibility on the nuclear issue are false. Fed Governor Cook meanwhile warned of continued inflation pressures.

Crude was choppy but ultimately settled marginally higher as conflicting US-Iran headlines dominated trade. Reports of potential sanctions relief and Iran halting uranium enrichment pressured crude, before doubts over the prospects of an agreement helped prices recover. Saudi Arabia's East-West pipeline also resumed oil exports.

In FX, the Dollar was marginally firmer, with price action largely tracking crude. NZD and GBP outperformed, while CHF, CAD, EUR and AUD lagged. The Yen was choppy amid further jawboning from Japanese officials, while attention turns to the RBA overnight, where a 25bp hike is expected.

Attention now turns to a key week of US data, with ISM Manufacturing, PCE and NFP set to test the strong growth, elevated inflation and solid labour market narrative.

FIXED INCOME

T-NOTE FUTURES (Z6) SETTLED 12 TICKS LOWER AT 104-15+

Yields rise across curve amid choppy geopolitics ahead of key US data this week. At settlement, 2-year +7.5bps at 4.935%, 3-year +8.0bps at 5.019%, 5-year +8.8bps at 5.081%, 7-year +8.5bps at 5.160%, 10-year +8.4bps at 5.251%, 20-year +7.4bps at 5.623%, 30-year +7.9bps at 5.569%.

THE DAY: Treasuries sold off across the curve on Monday, with yields rising around 7-9bps across maturities.

The rise in yields came amid choppy oil trade on conflicting geopolitical reports. Initially, oil prices rallied after Trump rejected a deal with Iran over the weekend, although he said talks would continue. Yields hit their peaks in the late US morning before paring from highs.

The move in yields off their peaks tracked crude lower following reports that US President Trump is prepared to ease sanctions on Iran and release frozen Iranian assets in exchange for progress on the nuclear issue. Yields saw further downside after reports that Iran had agreed to halt uranium enrichment in exchange for an easing of US sanctions; however, the move stalled as other reports suggested the chances of a deal remain extremely slim. Yields ultimately settled higher across the curve, but off session peaks.

Elsewhere, there was a lack of notable US data, with attention turning to PCE, ISM, Mfg., and NFP later this week. Fed Governor Cook warned of continued inflation pressures in the coming months, but noted that the labour market is well positioned to handle an increase in rates. Money markets currently price around 17bps of tightening for October, implying a 68% probability of another 25bp hike, while December prices around 38bps, fully pricing one additional hike and implying roughly a 52% probability of a second. This week's data will therefore be key in shaping those expectations further.

Supply

Bills

• US sold 3-mnth bills at high-rate 4.110%, B/C 2.99x; sells 6-mnth bills at high-rate 4.285%, B/C 2.64x
• US to sell USD 85bln of 6-week bills and USD 54bln of 52-week bills on September 29th; all to settle on October 1st.

STIRS / OPERATIONS

• Fed Hike Pricing via CME FedWatch: Oct 17bps (prev. 16.6bps), Dec 37.7bps (prev. 36.5bps)
• EFFR at 3.88% (prev. 3.88%), volumes at USD 112bln (prev. USD 105bln) on September 25th
• SOFR at 3.90% (prev. 3.88%), volumes at USD 2.914tln (prev. USD 2.99tln) on September 25th
• NY Fed RRP op demand at 0.85bln (prev. 0.58bln) across 3 counterparties (prev. 3) on September 28th

CRUDE

WTI (X6) SETTLED USD 0.19 HIGHER AT 92.60/BBL; BRENT (Z6) SETTLED USD 0.39 HIGHER AT 97.83/BBL

The crude complex was choppy, but ultimately settled with slight gains in heavy, albeit conflicting, headline newsflow. In most recent trade, WTI and Brent fell to lows of USD 91.25/bbl and 96.20/bbl, respectively, amid reports Iran has agreed to halt enrichment in exchange for easing US sanctions. Following this, and paring some of the moves, we swiftly had reports that the chances of an agreement are extremely slim, and that the gaps are wide and obstacles are significant. Before this, but post-European close, geopolitical risk on was seen as US official stated they are continuing positive discussions with Iran through intermediaries, and there will be no agreement without addressing the nuclear issue, as well as Trump is reportedly prepared to ease sanctions on Iran and release its frozen assets in exchange for progress on the nuclear issue. Prior to this, there was numerous mixed reporting, amid renewed US-Iran tensions over the weekend, including Trump rejecting Iran’s latest Hormuz proposal. However, oil dipped from session highs after reports that mediators are expected to hold separate talks with the US and Iran on Monday or Tuesday, but it was later said that Iranian Foreign Minister Aragchi's New York stay has not been extended.

On the supply side, and pressure was seen in the crude complex, as Saudi Arabia's East-West pipeline resumed oil exports. Elsewhere, Saudi Aramco is considering discounts on OSPs for crude loaded off Oman via ship-to-ship transfers to offset record freight rates, and the discussions with Asian refiners for second-half October loading cargoes involve a potential discount of around USD 9/bbl.

EQUITIES

CLOSES: SPX -0.76% at 7,685, NDX -1.08% at 30,277, DJI -0.67% at 51,482, RUT -0.63% at 2,820.

SECTORS: Consumer Staples +0.40%, Health +0.29%, Energy +0.22%, Real Estate -0.38%, Utilities -0.65%, Technology -0.70%, Materials -0.74%, Industrials -1.00%, Financials -1.14%, Consumer Discretionary -1.58%, Communication Services -1.67%.

EUROPEAN CLOSES: Euro Stoxx 50 +0.10% at 6,309, Dax 40 -0.01% at 25,407, FTSE 100 -0.10% at 10,685, CAC 40 +0.01% at 8,078, FTSE MIB -0.21% at 51,760, IBEX 35 -0.51% at 19,600, PSI +0.08% at 9,712, SMI +0.02% at 13,948, AEX +0.36% at 1,116

STOCK SPECIFICS:

• Nvidia (NVDA) board authorised a USD 150bln increase to the share repurchase prog., raising total prog. to USD 235bln.
• Apple (AAPL) ordered to pay USD 5.7bln in patent case.
• Boeing (BA) identified 737 MAX software glitch that could cause an automated navigation feature to fail during landing. In other news, FAA Administrator said software issue will delay Boeing MAX 10 certification, but not sure by how long.
• Northern Star Resources rejected a cash-and-shares takeover approach from Gold Fields (GFI) valuing it at AUD 38.7bln.
• Snowflake (SNOW) to offer USD 3.5bln of convertible senior notes.
• MongoDB (MDB) announced a CEO transition and Desai has stepped down as President and CEO, effective immediately and is leaving to pursue a senior role at Meta (META); reaffirmed guidance.
• ZIM (ZIM) reportedly recommended to drop deal by PM office, The Marker reported.

FX

The Dollar Index saw slight gains on Monday, as geopolitical updates dominated the tape ahead of pivotal US data later in the week, namely, NFP, PCE, and ISM Manufacturing PMI. There was no tier 1 data on Monday, while Fed's Cook said there are signs of broadening pressure in inflation data and expects to see continued inflation pressure in coming months from AI and Middle East conflict. Nonetheless, Dollar price action was dictated by oil moves, as the Buck saw highs as crude benchmarks rose riser through the European session.

G10 FX performance was mixed against the Greenback, with the Kiwi and the Pound eking out slight gains, and outperforming, while the Swissy lagged, followed by the Loonie, Euro, and Aussie, with the latter awaiting RBA overnight. As a reminder, the RBA is expected to hike the Cash Rate by 25bps to 4.60%, and the central bank has remained hawkish after three rate hikes earlier this year, with latest rhetoric and hotter-than-expected inflation supporting a hike. Meanwhile, precious metals saw notable weakness, with spot gold down c. 3.8% and spot silver 5%.

The Yen was choppy, as USD/JPY traded between 156.509-157.857, but fell to lows in the European morning amid further jawboning from Japanese officials; FX Official Mimura stated they are closely watching to see if markets take the clear message they are giving at face value. Not satisfied with or reassured by recent JPY action.

Elsewhere on the central bank footing, and seeing slight pressure in the Euro, was as ECB President Lagarde said that she views a measured response as appropriate to keep inflation in check. The ECB President also noted that growth was broad-based across most countries and sectors, and this pattern is expected to have continued in Q3. She added remain in the middle path for monpol that laid out earlier this year. On the neutral rate, she said rates are at the upper end of neutral range but she is not driving policy with a reference to the neutral range.