Oil Prices Edge Up As Traders Mull Supply Risks

Economic

Commodity

Summary:

Oil prices climbed on Monday as traders weighed concerns that Russian supply could be disrupted by more U.S. sanctions and Ukrainian attacks targeting energy infrastructure in Russia.

Brent crude futures rose 29 cents, or 0.4%, to $68.02 at 0839 GMT, and West Texas Intermediate (WTI) crude futures gained 36 cents, or 0.6%, to $64.02.

"The market is somewhat concerned that these peace negotiations are going nowhere," said Ole Hansen, head of commodity strategy at Saxo Bank.

"The market is looking for supply to exceed demand in the autumn months, but in the short term that's being challenged by a potential geopolitical disruption."

U.S. President Donald Trump warned again on Friday that he would impose sanctions on Russia if there was no progress toward a peaceful settlement in Ukraine in two weeks. He has also said he may hit India with harsh tariffs over its Russian oil purchases.

Speaking at the weekend, U.S. Vice President JD Vance said Russia had made "significant concessions" toward a negotiated settlement in the three-and-a-half year war.

Ukraine has repeatedly targeted Russian energy infrastructure during the war, and on Sunday carried out a drone attack which sparked a huge blaze at the Ust-Luga fuel export terminal, Russian officials said.

A fire at Russia's Novoshakhtinsk refinery, caused by a Ukrainian drone attack, was burning for the fourth day on Sunday, the region's acting governor said. The refinery sells fuel mainly for export and has an annual capacity of 5 million metric tons of oil, or about 100,000 barrels per day.

Softening the worries about Russian supply disruptions are OPEC+'s reversal of a series of production cuts, which are adding millions of barrels to the market, Saxo Bank's Hansen said.

Eight members of the oil exporters' group are scheduled to meet on September 7 where they are set to approve another boost.

Investors' risk appetite improved following Federal Reserve Chair Jerome Powell's signal on Friday of a possible interest rate cut at the U.S. central bank's meeting in September.

But despite that, both benchmark oil prices appear to lack momentum, said Priyanka Sachdeva, senior market analyst at brokerage Phillip Nova, adding that markets seem increasingly convinced that Trump's tariffs will hit economic growth.

Source: Reuters

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Yields Tick Up in Anticipation of Inflation Clues

U.S. Treasury yields inched higher on Monday morning as investors continued to analyze the implications of Federal Reserve Chair Jerome Powell’s speech and looked ahead to this week’s core personal consumption expenditures (PCE) report. The benchmark 10-year Treasury yield rose 1 basis point to 4.269%, while the 2-year yield added over 2 basis points to 3.713%, reflecting modest but clear shifts in market sentiment.

While yields typically climb when inflation or growth expectations rise, this latest uptick appears to be driven more by strategic positioning ahead of fresh data, rather than any dramatic change in outlook. Shorter-dated instruments like the 1-year and 3-month Treasurys saw slightly larger yield increases (+4.2 bps and +3.1 bps, respectively), suggesting some re-pricing of near-term rate expectations.

Jackson Hole Recap: Powell’s Balancing Act

Speaking at the Fed’s Jackson Hole Economic Symposium, Powell maintained a cautious tone. He avoided committing to an immediate policy shift but acknowledged that rising labor market risks may soon warrant adjustments to the Fed’s stance. He cited “sweeping changes” in U.S. tax, trade, and immigration policy as altering the risk landscape, a rare acknowledgement that structural geopolitical factors are weighing more heavily on monetary policy decisions.

Ronald Temple of Lazard noted that while a September rate cut is far from certain, Powell’s remarks have “increased the likelihood” of a 25-basis-point reduction in the fed funds target rate. This sentiment is increasingly shared among bond investors, who are now watching upcoming inflation data with renewed intensity.

The Data to Watch: July Core PCE on Friday

All eyes now turn to the release of July’s core PCE price index this Friday the Fed’s preferred inflation gauge. Forecasts suggest a 2.9% year-over-year rise, up slightly from 2.8% in June. A softer-than-expected print could further strengthen the case for rate cuts, while a hotter number might prompt the Fed to keep rates on hold longer.

Because PCE measures a broader swath of goods and services than CPI and uses chain-weighted methodology, it often signals inflationary pressure in a more dynamic and consumer-representative way. Therefore, even a 0.1% shift in the year-on-year figure can materially impact the Fed’s next steps and the bond market knows it.

Though no immediate pivot was announced at Jackson Hole, Powell’s tone subtly shifted acknowledging labor market vulnerabilities and longer-term geopolitical disruptions. That’s all markets needed to begin re-pricing risk. Treasury yields are now moving not on firm policy but on probabilities and this week’s PCE report could either validate or upend that cautious optimism.

Source: CNBC

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Olivia Brooks

Economic

After last week’s disappointing GDP numbers, today’s Ifo index shows that German companies are still in a Bing Crosby and The Andrews Sisters mood, ac-cent-tchu-ating the positives.

Germany’s most prominent leading indicator, the Ifo index, increased for the eighth consecutive month to 89.0 in August, from 88.6 in July. The Ifo index is now at its highest level in more than two years. While the current assessment component actually dropped to 86.4, from 86.5 in July, expectations increased to the highest level since the start of the Russian invasion of Ukraine.

It is still unclear where this optimism is coming from. Is it due to fiscal stimulus, a less benign take on US tariffs, or signs that the turning of the inventory cycle that we saw at the start of the year will pick up steam again? Possible, but definitely not a done deal.

All hopes on fiscal stimulus

Looking ahead, the German economy and industry will be particularly influenced by trade, the exchange rate, and fiscal stimulus. Following last week’s disappointing GDP data, it is still unclear how much positive momentum remains in the German economy after the back-and-forth of US tariff frontloading and subsequent reversals. In fact, with the latest framework agreement between the US and the EU, German exports will again be impacted. US tariffs of 15% on most European goods and uncertainty over whether (and when) the 27.5% tariffs on automotives will be brought back to 15% don’t bode well for German exports.

While financial markets seem to have grown numb to tariff announcements, let’s not forget that their adverse effects on economies will gradually unfold over time. The German Mittelstand could become a victim of US tariffs, as these hidden champions will have more trouble relocating production than big corporates. Add to that the stronger euro exchange rate – not only against the US dollar, but many other currencies – and it is hard to see how the export-dependent German economy will be able to get out of seemingly never-ending stagnation in the second half of the year.

All of this means that all hopes for a sustainable German recovery are on fiscal stimulus. In this regard, however, the current political debate in Germany on possible austerity measures could undermine the – at least psychological – impact of the announced fiscal stimulus for infrastructure and defence. As much as we subscribe to the need for sustainable public finances and structural reforms for the economy and the budget, it is a debate that would benefit from swift decisions. The longer a debate on potential austerity measures lasts, the higher the risk that households and companies will hold back spending and investment decisions – a risk factor that financial markets seem to have missed so far.

In short, today's Ifo index shows remarkable optimism of German businesses in the healing nature of fiscal stimulus for the economy. While we agree that eventually the government's spending plans for infrastructure and defence will lead to a surge in economic activity, there is still an increasing risk of underachieving. In any case, as much as we sympathise with accentuating the positives, we fear that it could take until the very special season of the year when they play even more popular Bing Crosby songs before the economy really enters a period of substantially stronger growth.

Source: ING

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Commodity

Beijing's Regulatory Tightening Sparks Rare Earth Rally

On Monday, shares of Chinese rare earth producers soared following the release of new policy details from China’s Ministry of Industry and Information Technology (MIIT). The move tightens Beijing’s already heavy regulatory control over the rare earths sector, with authorities now requiring producers to submit detailed and frequent output reports to the government.

This policy, while regulatory in nature, is being interpreted by markets as a bullish signal for large, state-backed producers that are best positioned to meet these compliance demands, thus consolidating their market share.

Market Response: Sector-wide Gains

Investors responded swiftly. Hong Kong-listed JL-Mag Rare-Earth Co. jumped as much as 18%, while China Northern Rare Earth Group High-Tech Co., one of the industry’s largest players, gained 10% in mainland trading. China Rare Earth Resources and Technology Co. climbed 8.5%, and Zhejiang Zhongke Magnetic Industry Co. rose 12%.

These gains reflect renewed confidence in the stability and pricing power of major producers, which are likely to benefit as stricter regulations weed out smaller, less compliant competitors.

Strategic Trade Weapon

China’s rare earth industry which dominates global supply of key elements used in electronics, renewable energy, and defense has long been considered a strategic lever in trade negotiations. Since President Donald Trump ramped up tariffs on Chinese goods, Beijing has responded by tightening its grip on critical supply chains like rare earths, using regulatory power both to control exports and combat smuggling.

The latest policy update builds on a June 2024 proposal and provides clearer definitions regarding the roles of enterprises, local authorities, and ministries in monitoring and enforcing production limits. The stated goal is to improve transparency and output traceability across the entire domestic supply chain.

Implications for Global Supply Chains

This move could reduce unregulated or excess production, effectively controlling supply and supporting global prices. It may also heighten concern among foreign buyers particularly in the United States and Europe who are already seeking to diversify their sourcing due to rising geopolitical risk and trade frictions.

As China doubles down on securing its strategic resource sectors, countries dependent on Chinese rare earths for EVs, wind turbines, and military tech may accelerate efforts to localize supply or seek alternative partnerships, a trend that could shape global trade and tech landscapes well beyond 2025.

Beijing’s move to strengthen surveillance and formalize output monitoring in the rare earths sector is part of a long-term strategy to consolidate industrial control, bolster pricing power, and use resource dominance as leverage in broader geopolitical dynamics. For investors, this means major state-affiliated producers are poised to benefit from both domestic policy tailwinds and sustained global demand for critical materials.

Source: Bloomberg

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Shanghai's Policy Shift Signals Broader National Strategy

On Monday, China’s financial capital Shanghai announced a significant loosening of its housing purchase restrictions, signaling another phase in the central government’s broader campaign to arrest the multi-year downturn in the real estate sector. This move forms part of Beijing’s calibrated approach to revive market confidence, especially in suburban zones burdened by oversupply and slow sales turnover.

Under the new rules, all Shanghai residents including non-locals are now permitted to purchase an unlimited number of homes in the city’s outer suburbs. Moreover, non-residents who have contributed to local pension programs for at least three years are now allowed to buy new homes in urban districts, expanding eligibility beyond the secondary housing market.

Market Reactions: Developer Stocks Surge

Investors responded positively. A Bloomberg Intelligence index tracking Chinese property developers jumped up to 3%, its biggest intraday gain in a month. Shares of China Vanke surged as much as 16% despite recently disclosing a wider first-half loss, while Sunac China Holdings gained up to 13%. These gains reflect renewed investor optimism that further easing and stimulus are in the pipeline.

Shanghai's housing policy pivot is notable due to the city's status as both a bellwether for national real estate sentiment and a strategic economic hub. According to Jeff Zhang from Morningstar, suburban transactions account for more than half of Shanghai’s total property sales. The easing will likely provide an "incremental positive" by unlocking buyer demand in these outer zones, which house approximately 80% of the city’s unsold residential inventory.

Song Hongwei of Tospur Real Estate Consulting emphasized that this is a "targeted" strategy meant to reduce inventory and lower entry barriers for homebuyers, particularly in underperforming suburban markets.

Mortgage and Affordability Incentives

In addition to eligibility expansion, Shanghai’s municipal government also introduced reforms to lower borrowing costs. It removed the distinction between first and second homes in calculating mortgage rates, likely reducing rates by about 40 basis points and incentivizing homeowners to upgrade to newer or larger properties.

For lower-income buyers, the city has increased the maximum mortgage amount available under the Housing Provident Fund to 2.16 million yuan ($302,000). These loans are about 45 basis points cheaper than standard first-home mortgages. Additionally, Shanghai will now allow residents to withdraw funds from their Provident Fund accounts to help cover down payments.

National Momentum Building

Premier Li Qiang recently reaffirmed the government’s commitment to stemming the property sector’s decline during a State Council meeting. This followed similar easing moves by Beijing earlier in August, which allowed unlimited suburban home purchases outside the fifth ring road.

China’s central planners have signaled since March their readiness to “fully unleash” housing demand, especially from first-time buyers and families seeking better living conditions. Reports from Securities Daily suggest further support measures, including accelerated urban redevelopment projects, could be unveiled in September.

The cumulative effect of Shanghai’s new policies coupled with prior easing measures in Beijing suggests a coordinated effort to stimulate buyer interest, reduce excess inventory, and restore some degree of stability to China’s long-beleaguered property market. However, the success of these initiatives will depend on their ability to overcome deep-seated demand-side hesitations, including job insecurity, weak household income growth, and broader macroeconomic headwinds such as U.S. tariffs and global supply-chain shifts. For now, the equity markets are responding with optimism but structural challenges remain.

Source: Reuters

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Daily News

[Quick Facts]

1. U.S. Vice President: New sanctions on Russia not off the table.

2. ECB's Lagarde: Foreign workers drive Eurozone economic growth.

3. Kazuo Ueda: Tight labor market expected to continue putting upward pressure on wages.

4. Ukraine: Zelenskyy will only discuss territorial issues with Putin.

5. Powell turns Dovish: Employment market risks become key trigger for rate cuts.

6. Bailey: Britain faces an "acute challenge" over its weak underlying economic growth and reduced labour force participation.

7. Kazaks: ECB in a 'Good Place' to observe the economy.

[News Details]

U.S. Vice President: New sanctions on Russia not off the table

On August 24th local time, U.S. Vice President J.D. Vance stated that imposing new sanctions on Russia to pressure it into ending the Russia-Ukraine conflict is off the table, as the United States has multiple options to exert pressure on Russia. Vance said that while the Trump administration is pushing to end the Russia-Ukraine conflict, security guarantees for Ukraine do not include the deployment of U.S. ground troops. He emphasized that the U.S. will not send ground forces to Ukraine. "But we are going to continue to play an active role in trying to ensure that the Ukrainians have the security guarantees and the confidence they need to stop the war on their end." He added.

ECB's Lagarde: Foreign workers drive Eurozone economic growth

European Central Bank President Christine Lagarde said on Saturday in Jackson Hole that the influx of foreign workers in recent years has injected momentum into the eurozone economy, helping to offset the impact of reduced working hours and declining real wages. Despite declining birth rates, immigration into the EU last year pushed its population to a historic high. However, due to domestic public dissatisfaction, governments are restricting the entry of new immigrants.

Lagarde pointed out that the increasing number of workers from outside the eurozone is a key factor supporting the region's economy, even as some sectors show a growing preference for shorter working hours. In her speech, she noted that although they represented only around 9% of the total labour force in 2022, foreign workers have accounted for half of its growth over the past three years. Without this contribution, labour market conditions could be tighter and output lower.

In Germany, for example, GDP would be around 6% lower than in 2019 without the contribution of foreign workers (assuming no behavioural changes among domestic workers). Spain's strong post-pandemic GDP performance – which has helped support the euro area aggregate – also owes much to the contribution of foreign labour. Last year, the EU population reached a record high of 450.4 million, with net migration offsetting natural population decline for the fourth consecutive year. However, this has also triggered political backlash among local voters, with growing support for far-right parties. For example, the new German government has suspended family reunification and resettlement programs in an attempt to win back voters attracted by the Alternative for Germany (AfD) party.

Kazuo Ueda: Tight labor market expected to continue putting upward pressure on wages

Kazuo Ueda, Bank of Japan Governor, stated that he expects the tight labor market to continue putting upward pressure on wages, reflecting his view that stable inflation is nearing establishment. Speaking at the Federal Reserve's annual Jackson Hole symposium in Wyoming on Saturday, Ueda said wage growth is spreading from large companies to small and medium-sized enterprises. Unless there is a significant negative demand shock, the labor market is expected to remain tight and continue exerting upward pressure on wages. Ueda's remarks may fuel market speculation about another interest rate hike this year, although he did not directly address monetary policy in his speech. The Bank of Japan has identified the country's labor shortage as a key factor in driving inflation through wage growth.

Ukraine: Zelenskyy will only discuss territorial issues with Putin

According to a report by the Russian satellite news agency on August 23rd, Ukrainian Deputy Foreign Minister Sergiy Kyslytsya said in an interview with NBC News that Ukrainian President Volodymyr Zelenskyy is prepared to discuss territorial issues only in a meeting with Russian President Vladimir Putin. "He (Zelensky — ed.) is ready to sit down with President Putin and discuss them, and the beginning of the talks on the territorial issue is the line of contact that is currently running there," he said.

The report noted that on August 18th, U.S. President Donald Trump hosted Zelenskyy and leaders from several European countries at the White House. After the talks, Zelenskyy stated that Russia and Ukraine would decide territorial issues, but no specific date for a bilateral meeting has been set. On August 22nd, Russian Foreign Minister Sergei Lavrov said there are currently no plans for a meeting between Putin and Zelenskyy, but the Russian president is willing to meet once the meeting agenda is prepared.

Powell turns Dovish: Employment market risks become key trigger for rate cuts

Federal Reserve Chair Jerome Powell made a speech at the annual economic symposium in Jackson Hole, Wyoming, on August 22nd. He stated that while inflation risks in the U.S. remain tilted to the upside in the near term, downside risks to the labor market are rising. Based on changes in the economic outlook and the balance of risks, the Fed may need to adjust its monetary policy stance. This signals that, despite current upside risks to inflation, the Fed could still cut interest rates in the coming months.

Powell's speech focused on employment market risks and adjustments to the policy framework, delivering a clear dovish signal and opening the door for a potential rate cut by the Fed in September.

"Overall, while the labor market appears to be in balance, it is a curious kind of balance that results from a marked slowing in both the supply of and demand for workers. This unusual situation suggests that downside risks to employment are rising." He pointed out that nonfarm payrolls (new jobs added in non-agricultural sectors) in July were just 73,000, far below the expected 115,000, and the previous month’s figure was revised downward by a substantial 258,000. Such anomalies could quickly evolve into widespread layoffs and a sharp rise in the unemployment rate. This emphasis on the insidious, the "boiling frog"-style risk in the labor market marks a stark contrast to Powell's tone at the 2024 Jackson Hole meeting, when he was more concerned about inflation persistence. Therefore, the sudden increase in downside risks to the labor market has led to what Powell described as "the balance of risks appears to be shifting," meaning the Fed will now pay closer attention to labor market risks and is prepared to implement rate cuts in response.

Powell's remarks suggest that the recent unexpected cooling in employment data has accelerated consensus within the Fed on the need for policy adjustment, making a September rate cut almost a certainty. Regarding the magnitude of the cut, a 25-basis-point reduction appears to be the only viable option, one that signals easing without stoking fears of policy disorder.

Bailey: Britain faces an "acute challenge" over its weak underlying economic growth and reduced labour force participation

Bank of England Governor Andrew Bailey stated at the Jackson Hole meeting that the issue in the UK labor market is no longer unemployment, but participation. "Going back to this question about potential growth rates, that puts even more emphasis on raising productivity growth," he mentioned. Low productivity and weak labor force participation pose "acute challenges" to raising the UK's potential growth rate. This contributes to the ongoing risk of persistent inflation, which must be addressed, and is one of the key reasons why restrictive policy must be maintained. Bailey warned that the labour demand is declining currently.

The Bank of England has revised its forecast for potential GDP growth (the pre-inflation "speed limit" of economic activity) down to just over 1%. Low potential output makes a country more susceptible to inflation. Alongside its decision this month to cut interest rates to 4%, the Bank of England also warned that price growth remains a threat.

Kazaks: ECB in a 'Good Place' to observe the economy

Governing Council member Martins Kazaks said that the ECB has entered a new monetary-policy phase where officials can focus on monitoring the economy rather than actively intervening to change its course. Inflation is at 2%, and Kazaks sees no need for more rate cuts as recent data shows no significant change in the outlook since the June quarterly projections. "We've seen good news, we've seen bad news, but not sufficiently big news to lead to a rethink of what we would need to do," he said, "I think we are still in a good place."

[Today's Focus]

UTC+8 22:00 U.S. July New Home Sales Annualized Total (Seasonally Adjusted)

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Stocks

Wall Street Optimism Propels Asian Equities Upward

Asian stock markets opened the week on a strong note, following a rally on Wall Street that was sparked by U.S. Federal Reserve Chair Jerome Powell’s dovish comments at the Jackson Hole Symposium. Powell acknowledged emerging risks in the U.S. labor market, fueling speculation that the Fed may begin cutting interest rates as early as September.

His comments came after a weaker-than-expected U.S. job report, adding weight to expectations that the central bank could ease monetary conditions to support the labor market and sustain growth. This shift toward a more accommodative policy stance provided a strong tailwind for Asian equities.

Broad-Based Gains Across the Region

Hong Kong’s Hang Seng Index jumped 2.1% to 25,866.49, with investor sentiment improving despite ongoing concerns about tariffs on exports to the U.S. The Shanghai Composite climbed 0.9% to 3,858.59, reaching its highest point in a decade, bolstered by positive sentiment around potential global liquidity easing.

Taiwan’s Taiex outperformed with a 2.5% rise, driven by a 3.1% gain in TSMC shares. The company continues to be a market darling due to its central role in global semiconductor supply chains and artificial intelligence.

Japan’s Nikkei 225 added 0.3% to 42,767.41, led by gains in chip-related sectors. Meanwhile, South Korea’s Kospi rose 1.1% to 3,204.48, supported by optimism in tech and export-linked industries. Australia’s ASX 200 edged 0.2% higher, while Thailand’s SET Index increased by 1%.

Lower Rates, AI Optimism, and U.S. Momentum

The risk rally has been fueled in part by Powell’s statement that the labor market is in a "curious kind of balance" fewer workers are chasing fewer jobs. Although he stopped short of explicitly promising rate cuts, the tone has been enough to shift market sentiment decisively.

In the U.S., the S&P 500 surged 1.5% to 6,466.91, the Dow Jones gained 846 points to reach a record 45,631.74, and the Nasdaq climbed 1.9% to 21,496.53. Smaller-cap stocks rallied even harder, with the Russell 2000 jumping 3.9% its best day since April as these companies are typically more sensitive to changes in interest rates.

Investor optimism is also building ahead of Nvidia’s earnings release later this week. As a bellwether for the AI sector, its performance could either reinforce or temper the current rally.

Bond Market Reacts: Yields Fall Sharply

The yield on the 10-year U.S. Treasury dropped to 4.25% from 4.33%, while the two-year yield, more closely tied to Fed policy expectations, fell notably to 3.69% from 3.79%. These declines reflect growing confidence that rate cuts are on the horizon, further supporting equity valuations.

In currency markets, the dollar strengthened slightly to 147.22 yen, while the euro eased to $1.1707. Oil prices were relatively steady, with U.S. crude up $0.08 to $63.74 and Brent crude gaining $0.04 to $67.26 per barrel.

The global markets appear to be shifting into a new phase where fears of inflation are being replaced by concerns about growth and employment. The Fed’s pivot or even the suggestion of one has lit a fire under equities, especially in Asia, where exporters and tech companies stand to benefit the most from improved liquidity conditions and renewed global demand. While uncertainties remain, the path to lower rates is now being priced in aggressively, and Asian investors are responding accordingly.