Crude oil fell 3.4% after the group of oil-producing nations continued an accelerated revival of supply that’s sent prices plunging. US equity-index futures dropped 0.5%, extending their decline after US President Donald Trump said he had no plans to talk to his Chinese counterpart this week. There’s no cash trading in Treasuries during the Asian day as Japan is closed for a holiday, along with markets in Hong Kong and mainland China.
Financial markets have steadied in the past two weeks – the S&P 500 on Friday posted its longest winning streak in two decades – amid signs that talks with Asian nations are progressing and trade tensions between China and the US are thawing. Trump also said in an interview Sunday on NBC that he’s willing to lower the tariff on Chinese imports to spur trade. Sentiment is also being supported after robust US jobs data alleviated concerns of a deep US recession.
“We’re cautiously optimistic, but traders will have their finger over the sell button” as they await details of US trade deals, said Nick Twidale, chief market analyst at AT Global Markets. “If they start to come through in the next week or two, then we can get another leg up, but if we don’t then there’s going to be a lot more uncertainty created and that could lead to some sharp corrections to the downside.”
The Australian dollar edged higher in early trading after the ruling Labor party notched its biggest election victory since World War II, giving Prime Minister Anthony Albanese a strong mandate to tackle much-needed economic reform and bargain with the Trump administration on tariffs. The Singapore dollar was slightly higher after the ruling People’s Action Party also secured a convincing victory at the weekend’s election. Currency strength in Asia has traders on watch for more signs of central bank intervention to protect their currencies from a further rapid appreciation after speculators turned the most bearish against the dollar since September.On Friday, Hong Kong intervened for the first time since 2020 to defend its peg, buying a record amount of US dollars after the city’s currency rose to the upper end of its trading band. The Taiwanese central bank also intervened to cap gains in its currency, as it soared the most since 1988 amid exporters’ aggressive offloading of the US dollar.“The natural way out of a lot of this trade tension is via the US dollar balloon deflating a bit,” said Brad Bechtel, global head of foreign exchange at Jefferies. A stronger yuan along with Asian currencies would be an “elegant solution” and the latest moves could be “the first sign we are moving that direction.”
Meanwhile, the OPEC+ major production increase added to supply at a time when demand is challenged by the drag from the trade war. The alliance — led by Saudi Arabia and Russia — has been reversing prolonged output curbs that were meant to support prices, but which cost it market share to rival drillers.
“Risk has skewed rapidly to the downside,” Brian Leisen, a commodity strategist at RBC Capital Markets wrote in a note to clients. “We think WTI near $50/bbl is likely the next key level on the current trajectory, and we see the fundamental backdrop over the next two months pushing the front of the forward curve into full structural contango.”
In corporate news, Shell Plc is working with advisers to evaluate a potential acquisition of BP Plc, though it’s waiting for further stock and oil price declines before deciding whether to pursue a bid, according to people familiar with the matter. Shell may also wait for BP to reach out or for another suitor to make a first move, and its current work may help get prepared for such a scenario, they said.
Warren Buffett, who built Berkshire Hathaway Inc. into a business valued at more than $1.16 trillion and himself into a celebrity billionaire renowned for his investing acumen and witticisms, will step down at year-end after six decades atop the conglomerate. Greg Abel, the vice chairman for non-insurance operations, will take charge of the conglomerate.
This week, US Treasury Secretary Scott Bessent is set to testify in Congress on fiscal and economy policy and the Bank of England and the Fed will give policy decisions.
“While the Fed is highly unlikely to cut rates, the market will focus on forward guidance, which is likely to be sparse if anything given the uncertainty,” Marc Chandler, chief market strategist at Bannockburn Capital Markets, wrote in a note.
