Key Takeaways
- Oil prices fell after OPEC+ announced a significant increase in output for September, adding 547,000 barrels per day to the market.
- Goldman Sachs highlighted that recent two-month job revisions were the largest outside of a recession since 1968, with expectations for further substantial revisions next month.
- China is reportedly restricting the supply of critical minerals vital for Western defense industries, causing production delays and increased costs.
- The US Dollar Index weakened amid rising expectations of a Federal Reserve interest rate cut, fueled by weaker-than-expected US jobs data.
- Boeing (BA) fighter jet workers are set to strike after rejecting a labor agreement, impacting defense production.
Global markets are navigating a complex landscape marked by significant shifts in monetary policy expectations, geopolitical tensions, and labor market dynamics. Oil prices experienced a notable decline following a decision by OPEC+ to boost output, while concerns about China's control over critical mineral supplies are impacting Western defense industries. Meanwhile, the US dollar has weakened as the market anticipates potential Federal Reserve rate cuts.
Oil Prices Dip on Increased OPEC+ Output
Oil prices saw a downturn after the OPEC+ alliance confirmed an increase in oil production by 547,000 barrels per day for September. This marks the sixth consecutive month the group has raised output, gradually restoring 2.2 million barrels a day of supply that was withheld from the market. The decision aims to regain market share amidst stable oil prices and a steady global economic outlook. West Texas Intermediate (WTI) crude fell below $66.50 following the announcement.
US Labor Market and Fed Rate Cut Expectations
Goldman Sachs has pointed out that the recent two-month job revisions were the largest outside of a recession since 1968, and the firm anticipates more significant revisions in the coming month. This data, alongside a weaker-than-expected US July payroll report, has bolstered speculation that the Federal Reserve may cut interest rates as early as next month. The probability of a Fed rate cut at the September FOMC meeting reportedly rose to 84% from 40% prior to the release of the payroll and ISM reports. Consequently, the US Dollar Index (DXY) has weakened, retreating from a two-month high.
China's Critical Mineral Restrictions and Asian Market Impact
China is reportedly choking the export of rare earths and key minerals vital for Western defense systems, according to a Wall Street Journal exposé. This move is causing production delays and forcing Western defense companies to scramble for stockpiles, driving up costs across the US defense sector. This development, alongside the OPEC+ output hike, contributed to mixed trading in Asia-Pacific stocks as investors weighed the implications of tariffs and reduced exposure to riskier assets, leading to falls in broader Asian markets.
Boeing Workers Set to Strike
Over 3,200 unionized workers who assemble Boeing's (BA) fighter jets in the St. Louis area are set to strike after rejecting a modified four-year labor agreement. The International Association of Machinists and Aerospace Workers union stated that the offer "fell short of addressing the priorities and sacrifices" of its members. Boeing (BA) has activated its contingency plan to ensure continued support for its customers.
Other Key Developments
The People's Bank of China (PBoC) injected 544.8 billion Yuan through 7-day reverse repos at an unchanged rate of 1.40%, while draining a net 49 billion Yuan at open market operations. The PBoC also fixed the USD/CNY reference rate at 7.1395, stronger than the previous fix. The Yuan (CNY) is trading at 7.1850 per dollar in the early session, lower than its previous close of 7.1930.
Profit-taking is weighing on gold prices after recent US jobs data fueled a price surge.
BYD Co Ltd (BYDDF) faced a 2.9% opening decline amid market volatility.
In Australia, the Melbourne Institute Inflation (M/M) for July rose to 0.9% from 0.1% previously, while the year-on-year inflation remained at 2.4%.
In other regional news, South Korea is set to initiate the removal of anti-North Korea loudspeakers on Monday. Hong Kong's booming wealth sector is expected to lead hiring and office expansion. Standard Chartered (STAN) plans to launch a digital platform aimed at young investors. Hyundai Motor (HYMTF) showcased its hydrogen mobility for Saudi Arabia's Neom project, successfully completing driving tests in challenging terrain.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.