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Morning Bid U.S.

A Reuters Open Interest newsletter

What matters in U.S. and global markets today

By Anna Szymanski, Editor-in-Charge, Reuters Open Interest

Crude oil prices rose on Monday morning after military action between the U.S. and Iran escalated over the weekend.

In equities, memory chip stocks extended recent losses in Asia trading, with South Korea's chip-heavy KOSPI index slumping. Global stocks looked shaky early on Monday, ahead of a packed week which will bring second-quarter earnings and U.S. June inflation data.

I'll get into that and more below.

But first, listen to the latest episode of the Morning Bid daily podcast, where we discuss markets' response to escalating tensions in the Middle East.

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Today's Market Minute

U.S. and Iranian forces exchanged heavy missile and drone assaults, with Tehran targeting U.S. facilities in states across the Gulf and saying it had again closed the vital Strait of Hormuz, sending oil prices higher.
SK Hynix fell more than 15% on Monday as investors in Seoul cashed out of a share price rally following its Nasdaq debut last week, with its decline contributing to a 9% plunge in South Korea's KOSPI.
European jet fuel stocks are now wafer thin. The region has imported volumes from the U.S. and Asia, raised its refiners' output and drawn on stocks to keep planes flying - yet it remains the region most exposed to renewed Middle Eastern tensions.
Cheap, mass-produced drones have turned energy into the global economy's weak spot, with unmanned aircraft able to target critical infrastructure, argues ROI Energy Columnist Ron Bousso.
Asia's LNG imports are poised to hit a six-month high in July while Europe's imports plunge, underscoring how Europe is falling behind in building winter inventories, writes ROI Asia Commodities Columnist Clyde Russell.

Crude up, chips down

U.S. forces conducted another wave of strikes on Iranian targets on Sunday, with Tehran then targeting U.S. facilities in Bahrain, Kuwait, Oman and Jordan on Monday.

Brent crude jumped early on Monday to nearly $80 per barrel before paring some of those gains to trade around $78/bbl - a response that, like last week's, seems fairly restrained, with prices still below levels seen before the shaky interim peace deal was signed in mid-June.

But chaos and uncertainty are hanging over Hormuz once again amid conflicting claims around the status of shipping. While Iran said it had closed the strait, U.S. President Donald Trump said it remained open.

Tanker traffic data so far appears to align with Tehran's view. Transits fell dramatically last week as the initial U.S.-Iran tit-for-tat attacks unfolded, and they have remained low over the weekend. Only six vessels transited the waterway on Sunday, the lowest number in five weeks, according to ship-tracking data from Kpler.

Elsewhere, volatility in semiconductor stocks looked set to continue as South Korea's chip-heavy KOSPI index closed down nearly 9% on Monday, dipping under 7,000 for the first time since early May. It also re-entered bear market territory, finding itself some 25% below its June 22 peak.

The KOSPI's slide was partly driven by a more than 15% plunge in memory chipmaker SK Hynix, its biggest one-day decline on record, which follows a more than 12% jump in its U.S.-listed shares after their Nasdaq debut last Friday.

Global equities at large looked cautious and bond yields rose on Monday morning. Wall Street futures were in the red before the bell and European shares opened lower.

Investor focus will now shift to the second-quarter earnings season, which gets underway in earnest this week, notably with a bank earnings bonanza on Tuesday.

Tuesday will also bring U.S. consumer price inflation data for June, with the core measure, which strips out energy prices, likely to be watched closely for a read on underlying price pressures. The release follows a recent hawkish turn at the Federal Reserve, where new chair Kevin Warsh last month reaffirmed a commitment to price stability.

Today's key chart

Graphics are produced by Reuters.