A spike in oil prices stokes inflation fears

The Dow Jones finished 0.6% lower on Tuesday, and the S&P 500 lost 0.4% while the Nasdaq closed slightly below the flatline, pressured by higher crude oil prices and concerns about the global economic growth following PMI data for China pointed to the slowest expansion in China’s services output in 8 months.  The risk-off mode sent the dollar to March level highs while Treasury yields continued to edge up as the US economy remains resilient.  Meantime, European shares also fell yesterday, led by a 1.3% decline in construction shares amid growing pessimism regarding the global economy’s health.  Updated PMI figures for both Sapin and Italy pointed to an unexpected contraction in services activity last month while private sector activity in the Euro Area, German and France decline more than initially expected. 

Summary for 06.09.2023 

• Most Asian shares fell on Wednesday amid continued concerns over an economic slowdown in China, while Japanese markets outperformed their peers as Bank of Japan members reiterated the need for easy monetary policy.  Meanwhile, data showed that Australia’s economy expanded more than expected in the second quarter.  Shares in Australia, South Korea, Hong Kong and mainland China declined, while Japanese equities gained for the eighth straight session amid a weakening yen. 
• European and US shares are on track for a cautious start as the latest oil rally stoked inflation worries. 
• Oil held near the highest since November after OPEC+ leaders Saudi Arabia and Russia announced that they would extend supply curbs through the end of the year, tightening the global market.  West Texas Intermediate traded near $87 a barrel after the twin announcements on Tuesday, which drove a 1.3% gain.  While traders had anticipated the volume of the cuts, the duration was unexpected.  The strategy will help to drain inventories further, providing upward pressure for prices. 

• The Australian economy expanded 0.4% quarter on quarter in Q2, the same pace as an upwardly revised figure in Q1 but above market forecasts of a 0.3% growth.  This was the seventh straight period of economic growth, amid positive contribution from net trade as exports rose more than imports.  Through the year, the economy grew 2.1%, slowing from a 2.4% gain in Q1. 
• SoftBank Group’s Arm Holdings is planning to raise as much as $4.87 billion in the chip designer ‘s long-anticipated initial public offering, marking lowered ambitions for an IPO that was once expected to generate roughly twice that amount.  Arm will offer 95.5 million American depositary shares for $47 to $51 each, the company said in a filing Tuesday with the US Securities and Exchange Commission.   
• Airbnb rose nearly 8% Tuesday, while Blackstone was up 4% after S&P Dow Jones Indices said last Friday both companies would join the S&P 500 beginning 18^th September. 
• Oracle shares rose 2.6% yesterday after a Barclays analyst upgraded the share to “overweight” from “equal weight”, saying the company’s cloud business should benefit from artificial intelligence. 
• Danish drug company Novo Nordisk yesterday became the most valuable company in Europe, surpassing luxury goods giant LVMH, thanks to the launch of its weight loss drug Wegovy in the UK.