Global Mood: Cautiously Risk-on
Drivers: US-Iran Peace efforts, West Asia Oil Supply Concerns Easing

Asian stocks traded mostly higher on Tuesday, tracking a strong Wall Street rally led by technology shares. South Korea's KOSPI gained around 2%, while Australia's S&P/ASX 200 edged higher and Chinese shares were little changed. The SGX Nifty was at 23,511, up 71.5 points or 0.31%, pointing to a positive opening for Indian equities.

US equities rallied overnight as renewed enthusiasm around artificial intelligence lifted technology stocks, with the S&P 500 gaining 1.5% and the Nasdaq Composite jumping 2.3% to a record closing high. 

Oil remained near $100 a barrel as investors assessed easing supply risks in West Asia and efforts to end the US-Iran conflict, offering some relief on inflation concerns while keeping energy markets in focus.

Trump said he would be open to meeting Iranian President Pezeshkian at the UN General Assembly this week, raising hopes for a possible diplomatic breakthrough and pushing Brent to an 11-day low.

THE BIG STORY
The Houthis are pushing to seize strategic mountain positions linking Yemen’s Red Sea coast with the south, despite intensified Saudi airstrikes. Their gains around the Bab el-Mandeb threaten Saudi Arabia’s alternative oil-export route as Hormuz remains constrained.

The New York Times reported that President Donald Trump called off planned strikes on the Houthis at the last minute.  Saudi Arabia has sought US military support, while Britain agreed to provide limited defensive refuelling assistance.

Saudi shipments through the Strait of Hormuz have increased to about 2.9 million barrels per day from 700,000 in August, helping cap crude prices near $100 a barrel. 

However, the rerouting comes at a high cost, while US diesel prices hit another record.

The September 24 US-China summit is expected to focus on extending their trade truce rather than securing breakthroughs. China's export surplus remains strong despite US tariffs, while Taiwan, Chinese purchases of US goods and Beijing's ties with Iran could feature in negotiations.

Data Spotlight
The Chicago Fed National Activity Index fell to -0.04 in August from an upwardly revised +0.08 in July, as production-related indicators dragged to -0.07 and sales, orders and inventories contributed nothing. 

The three-month moving average improved marginally to +0.01 from -0.01, pointing to broadly trend-level economic growth.

The People's Bank of China held its one-year LPR at 3.0% and five-year LPR at 3.5% for a 16th consecutive month, maintaining a supportive stance amid West Asia conflict uncertainty and weak domestic credit demand. 

Industrial production growth accelerated, though retail sales missed expectations and housing prices continued to decline, albeit at the softest pace in eight months.

Takeaway: Softer US activity points to weaker industrial momentum, while China's unchanged lending rates reflect continued caution amid weak domestic demand. The contrasting data highlight divergent policy challenges as energy costs remain elevated.

WHAT HAPPENED OVERNIGHT

US stocks hit record close as AI optimism reignites and oil, yields ease on UN peace hopes

• The Nasdaq gained 2.26% to a record close, its first since June 2, while the S&P 500 rose 1.49%.
• The Dow added 0.71%, as oil below $100 and yields retreating below 5% turned key headwinds into tailwinds.
• AMD rose 10% to hit a $1 trillion market cap for the first time; Intel surged 12.2%, Arm Holdings jumped 17%, and the Philadelphia Semiconductor Index gained 4.3%.
• Meta soared 11.4% after Wells Fargo raised its price target following the launch of its Muse AI assistant; communication services led sector gains at 4.16%.
• October Fed hike odds stand at 50%, with commentary from at least 10 central bank policymakers due this week.
• A US-China summit on Thursday could cover the trade truce extension, Iran war, and AI regulation.

US Treasury yields ease below 5% as oil decline and diplomacy hopes lift bonds

• The 10-year yield fell 4bps to 4.95% as oil's four-session decline eased inflation concerns,
• Hopes of a diplomatic breakthrough at UNGA and the Trump-Xi summit lifted sentiment.
• Chicago Fed's Goolsbee said he remains open to inflation resuming its decline toward 2% but warned rates may need to rise if that fails to materialise.
• Several Fed officials are due to speak this week, with markets pricing in another 25bps hike this year and watching for clues on the policy path.

US Dollar holds near July highs as hawkish Fed speak reinforces further tightening bets

• The dollar index held at 100.3 near its highest since late July as Goolsbee warned the Fed cannot overlook persistent supply shocks.
• Fed president Alberto Musalem said additional hikes may be needed to hit the inflation target.
• Williams and Barkin are due to speak today, with markets closely watching for further clues on the pace of tightening after last week's first hike in three years.
• Four sessions of oil declines, amid UNGA diplomacy and continued regional energy flows, eased inflation concerns at the margin and capped further dollar upside.
• Traders remained alert for possible yen intervention, adding a wildcard to dollar-yen positioning.

Oil dips below $100 as Saudi Arabia ramps up Gulf loadings after East-West pipeline attack

• Brent fell below $100/bbl for the first time since September 9 as expectations of higher Saudi volumes weighed on prices.
• Aramco loaded 14 million barrels on seven VLCCs at Ras Tanura on Sunday, the latest sign of a partial supply recovery after the East-West pipeline attack on September 13.
• Gulf crude loadings averaged 3.7 million bpd since September 12, up from 2.9 million bpd earlier in the month, as exports shift from the shut Yanbu Red Sea port to Gulf terminals.
• Saudi Hormuz flows averaged 2.9 million bpd over the past six days per JP Morgan, up sharply from just 700,000 bpd in August.
• Aramco sold 60 million barrels from Ras Tanura for ship-to-ship transfer at Oman's Sohar port this month and next, redirecting Asian-bound supply around the pipeline disruption.

Day’s Ledger*

Economic Data

• US Weekly ADP Employment Data

Corporate Actions 

• Rama Steel Tubes to consider fund raising 

Policy

• Reserve Bank of Australia Governor Bullock Speaks
• German Buba President Nagel Speaks
• German Buba Balz Speaks
• ECB President Lagarde Speaks
• US FOMC Member Williams Speaks
• German Buba Vice President Buch Speaks
• US Fed Governor Jefferson Speaks
• US FOMC Member Barkin Speaks

 

Tickers to Watch

• SURYODAY SMALL FINANCE BANK approves raising up to 2 billion rupees via Lower Tier II NCDs in a single series on a private placement basis.
• ONGC strikes gas at deepwater well MN-DW18-1-H-D in the Mahanadi Offshore Basin off the Odisha coast, on September 18.
• MOTILAL OSWAL FINANCIAL SERVICES’ finance committee to meet September 24 to consider raising funds via NCD issuance through private placement, in one or more tranches.

Must Read

• After the Swap Window: Managing What the Rupee Rescue Has Left Behind
• Surviving the Global Energy Squeeze: Why India Must Keep Its Guard Up
• RBI’s Room to Stay on Hold Narrows as Domestic, Global Risks Converge
• The Quiet Can Get Loud When You've Lived in Chaos

(*Compiled from various media sources)

See you tomorrow with another edition of The Morning Edge.

Have a great trading day