GGMA Markets Briefing: Oil Slumps as Trump Calls Off Iran Strike, Yen Firms on Joint Intervention
Crude has given up a large slice of its war premium at the start of the week after President Trump called off an imminent attack on Iran at the urging of Gulf states and pointed to talks beginning today on a plan to reopen the Strait of Hormuz (WSJ). WTI is down 6.1% at 79.5 dollars, and Brent down 5.4% at 83.17, and the relief has spread straight into equity futures and bonds.
Qatari mediators say Iranian diplomats reacted positively to their proposal and that a compromise may be near (BBG). US futures are firmer, with the S&P 500 up 0.6%, the Nasdaq up 0.8% and the Russell 2000 up 0.7%, and European futures follow, the DAX up 1.0% and the Euro Stoxx 50 up 0.8%. That builds on Friday's cash close, where the S&P 500 rose 0.7% and the Nasdaq 100 0.6% as Amazon's results lifted the whole AI complex (BBG).
Asian equities did not share the mood. Korean stocks led the region lower as chipmakers gave back a large part of an extraordinary week, with the Kospi 200 down 4.5% and Samsung Electronics and SK Hynix both falling around nine per cent after rallies that had reached 27% and 30% by Friday (BBG). Foreign investors, who bought a record amount of Korean stock on Friday, drove the reversal. Chinese equities fell too, the CSI 300 down 1.1% after a weak factory survey, while Hong Kong was only a little changed. Japanese cash equities are also trading lower. Set against that, MSCI's emerging-market gauge rose 0.8%.
Regarding central banks, Bloomberg reported that Chairman Kevin Warsh has floated cutting the number of Federal Reserve policy meetings to six a year, plus two devoted to a substantive topic, and has already raised the prospect of fewer press conferences and a shorter statement (BBG). That lands badly with a market still digesting a press conference at which he gave no steer at all despite three of twelve members voting to hike (Yahoo). The three dissenters made their case on Friday, with Cleveland's Beth Hammack warning that the longer high inflation persists the costlier it becomes to remove, Minneapolis' Neel Kashkari drawing a parallel with the 1970s, and Dallas' Lorie Logan arguing inflation is settling in the mid-twos and that modest action now would reduce the need for sharper action later (Washingtonpost). Richmond's Tom Barkin called it a close call whether rates are high enough, and pointed to business-to-business price increases of three to four per cent that are sticking (WSJ). Markets price 16.8 basis points of tightening for the September meeting and 34.5 basis points cumulatively by December. In Britain, Chief Economist Huw Pill, who voted against the Bank of England's 6-3 hold, warned of slow-moving but more insidious second-round effects from the energy shock, while noting that inflation expectations have not become substantially deanchored (Reuters). The People's Bank of China pledged over the weekend to adjust policy tools in a timely manner and keep liquidity ample (Reuters).
In currencies, the yen is the whole story. Dollar-yen is down 0.6% at 156.42 after the first joint intervention by Japan and the United States in fifteen years, and traders were left guessing this morning whether the authorities were back in the market or whether the move was algorithmic (BBG). Treasury Secretary Scott Bessent said he would not hesitate to participate in further joint intervention and called for the Federal Reserve's FIMA repo facility to be upsized, a mechanism that lets Japan raise dollars against its Treasury holdings instead of selling them (Reuters). The detail that matters for the rest of the market is how it was funded: strategists believe the New York Fed sold euros rather than dollars to buy yen on the Treasury's behalf, keeping Washington's strong-dollar policy intact (BBG). The dollar gauges softened accordingly, the Bloomberg dollar index down 0.2% and the DXY down 0.2%, while the Korean won firmed with dollar-won down 0.7% despite the equity rout. Sterling is a touch lower at 1.3474 and the euro marginally firmer at 1.1535.
Government bonds rallied on the oil move. The US ten-year yield sits at 4.69% and the thirty-year at 5.23%, both easing back after a month in which the long end did the damage, with the thirty-year finishing July at a nineteen-year high. Strategists describe the post-meeting move as a twist steepener, front-end yields falling while the long end rose, and read it as the market doubting the Federal Reserve's resolve rather than welcoming the hold (Reuters). Japanese bonds went the other way, with the ten-year yield at 2.83% and the two-year at 1.56%, its highest in three decades, as the short end prices a greater chance of an early Bank of Japan move. The Japanese ten-year future fell 0.3%. Australian and Chinese ten-year futures were marginally lower.
In commodities beyond crude, gold rose 0.3% to 4,058 dollars, after US President Donald Trump said fresh negotiations with Iran would begin later on Monday, raising hopes for a breakthrough in the months-long conflict that would ease energy-driven inflation, which could potentially lead to lower yields and benefit gold. (BBG). Copper gained 1.1% and industrial metals 0.4%, while the broad commodity index fell 1.5% on the energy weighting alone. OPEC and its partners agreed on Sunday to raise production quotas again next month, completing the theoretical unwind of the 2023 cuts and leaving room to add real barrels once Gulf shipping normalises (Yahoo). Bitcoin did not join the risk rally, falling 1.1% to 62,721 dollars, with ether down 1.5%.
The overnight data run was mixed, and China was the disappointment. The RatingDog manufacturing PMI fell to 50.9 in July from 51.7, missing the 52.0 consensus and marking a four-month low. Japan's final manufacturing PMI slipped to 54.5 from 54.7 but stays comfortably expansionary, and Australia's was revised up to 52.0 from 51.7. Australia's Melbourne Institute inflation gauge jumped 1.0% on the month after a 0.4% fall and rose to 4.0% year on year from 3.9%, keeping it above the Reserve Bank's target band, and it arrives alongside data showing house prices fell 0.7% in July, the steepest run of declines since December 2022 (BBG). New Zealand building permits fell 3.6% on the month, with the prior revised down to a 4.9% fall.
On the corporate tape, Friday's session set the tone that Asia is now testing. Amazon rose 15% on cloud revenue growth of 37%, the fastest since 2021, while Apple fell 7.4%, its worst day since April 2025, after component shortages hit its guidance, and the beat rate across the S&P 500 companies reported so far is the best in five years (BBG). Alibaba gained in Hong Kong after releasing its latest flagship artificial-intelligence model, and China's DeepSeek rolled out a public beta interface for its own model on Friday (BBG).
In Britain, Chancellor John Healey has set the budget for 28 October and told cabinet colleagues that new announcements must be funded from existing budgets, which is the reassurance gilts wanted from a government elevating a raft of unfunded pledges (Guardian).
Ahead today: Swiss inflation, where consensus looks for a slowdown to 0.4%, and the final euro-area manufacturing PMIs, with the US ISM manufacturing survey this afternoon. The week builds to Friday's US payrolls, where economists expect a gain of about 85k after June's disappointing 57k and an unemployment rate steady at 4.2%, preceded by job openings tomorrow, ADP on Wednesday and claims on Thursday (BBG).
Time Stamp: 3 August 2026, 07:37 CET