Hopes of improving crude supplies have weighed on oil prices for most of this week

International News via Reuters:

Global shares paused on Wednesday after a four-day winning streak as oil prices drifted higher while investors awaited details on peace efforts in the Middle East.

Hopes of improving crude supplies have weighed on oil prices for most of this week. A sustained resumption of oil flows through the Strait of Hormuz would help significantly to keep inflation in check, which in turn would impact the global outlook for interest rates. 

However, caution persists as similar hopes have been quickly dashed in the past. US President Donald Trump said talks with Iran in New York had made progress, but then threatened to “annihilate” the country if a deal was not reached. 

“We’ve been through a series of starts and stops like this,” said Cole Smead, CEO and portfolio manager at Smead Capital Management.

“We’re in a pretty momentum-dominated market. I don’t think most people feel comfortable stepping in the way of headlines.”

The pan-European STOXX 600 index slid 0.42% to 640.16 points, while Brent crude futures rose 0.62% to $98.86 per barrel.

An MSCI index of global stocks dipped 0.11% after four consecutive days of gains.

“We’re probably nearing a point where it’s in both sides’ best interests to de-escalate the conflict and find a way to move forward,” said Brock Weimer, analyst, investment strategy, at Edward Jones.

Iranian President Masoud Pezeshkian addresses the UN General Assembly later on Wednesday and markets are alert to reports he might hold talks with Trump.

On Wall Street, futures tracking the benchmark S&P 500 and the tech-heavy Nasdaq-100 were down 0.07% and 0.27%, respectively.

ASIA RIDES AI WAVE

In Asia, stocks rose as consumer hunger for AI apps continued to buoy tech stocks.

Renewed buzz over AI helped South Korean stocks gain 0.9%, with Samsung up nearly 1%, while Taiwan’s benchmark firmed 0.8% to near all-time peaks.

The data hardware sector has been buoyed by strong consumer take-up of Meta’s Muse agent, which has topped US app download charts in the past two weeks.

Analysts are now keen to see how a similar product from Alphabet’s Google Labs, known as CC, will fare with consumers.

Chinese President Xi Jinping arrives in Washington later in the day amid speculation that a trade truce between the two countries will be extended, and there could be cooperation over AI.

Japanese markets were closed for a holiday, but Nikkei futures were trading at 66,425 , about 1,400 points above where the cash Nikkei closed on Friday. 

“We expect a strong reopening in Japan tomorrow, with another move lower in crude, calm conditions in rates and Treasuries,” said Chris Weston, head of research at broker Pepperstone.

“Memory stocks have taken the leadership baton, backed by another strong session for semis, which have recorded a sixth consecutive day of gains.”

Also of note was demand for SoftBank’s $10 billion-plus debt deal which has reportedly drawn more than $20 billion in indications of interest. That would make it one of the largest junk bond deals ever.

The 10-year yield rose 1.28 basis points to 4.9798%, close to the 5.0% pain barrier.

Richmond Fed President Tom Barkin and Boston Fed President Susan Collins on Tuesday both voiced support for last week’s rise in interest rates given concerns about inflation.

The prospect of higher rates helped the dollar hit multi-week highs versus the euro, sterling and Canadian dollar. The euro was left pinned at $1.1410, near a two-month low. 

Analysts said that a call from Trump to ban US diesel exports was potentially bad news for European inflation since the zone relied heavily on US shipments of the fuel.

The dollar was firmer against the yen at 157.93, with speculators wary of drawing more Japanese intervention on any push past 160.00.

Reporting by Niket Nishant in Bengaluru and Wayne Cole in Sydney; Editing by Christopher Cushing, Kim Coghill and Gareth Jones

The former Portuguese prime minister, whose second five-year term ends on December 31, reiterated his calls for global oversight of AI risks, just as the UN’s 15-member Security Council prepares to host AI leaders for a briefing on the powerful technology

International News via Reuters:

United Nations Secretary-General Antonio Guterres used his final address to the General Assembly on Tuesday to urge world leaders to regulate artificial intelligence, end wars, focus on climate change and overhaul UN institutions he warned are struggling to confront mounting global challenges.

The former Portuguese prime minister, whose second five-year term ends on December 31, reiterated his calls for global oversight of AI risks, just as the UN’s 15-member Security Council prepares to host AI leaders for a briefing on the powerful technology.

Guterres also reflected on the gridlock within the organization, as nearly 130 world leaders gathered in New York, and Chinese President Xi Jinping and others — including leaders from South Africa, India and Germany — skipped the diplomatic meeting.

Delegates responded with sustained applause when Guterres defended a two-state solution for Israelis and Palestinians, demanded that “polluters must pay” for climate change and pressed for reforms to international institutions, causes he has championed throughout his decade leading the United Nations.

The address capped a decade-long tenure in which Guterres sought to position the UN as a mediator in conflicts and a forum for governing emerging technologies, even as major powers increasingly bypassed the organization and Washington slashed its funding.

“Those countries leading this technological revolution must share information on emerging safety risks, cooperate on testing and evaluation – and work towards common safeguards that protect us all,” Guterres told the assembly.

He called on the leaders gathered in New York to “advance the conditions for the responsible pacing of AI and the additional safeguards needed to address risks” and to “work towards a multilateral AI risk management framework, supported by credible and independent oversight.”

US Treasury Secretary Scott Bessent said on Sunday that Washington had proposed a new AI safety notification mechanism for US President Donald Trump and Chinese President Xi to consider at their summit this week. The proposal emerged from talks on establishing a US-China AI dialogue and would cover AI-related incidents with national security implications.

A CHAMPION FOR GLOBAL GOVERNANCE OF AI

Guterres has long pushed for global governance of AI. In 2023, the UN created a ‌39-member ⁠advisory body on AI, with members including tech company executives, government officials and academics from countries such as the US, Russia and Japan.

The Security Council, which is charged with maintaining international peace and security, met for the first time on the risks of artificial intelligence the same year, when China said the ​technology should not become a “runaway horse” and Washington warned against its use ​to censor or ⁠repress people.

On the Middle East, where the conflict has widened as Houthi gains along the Red Sea coast threaten shipping routes and tensions persist in the Strait of Hormuz, Guterres called for “de-escalation and dialogue.”

“Together, let’s send a clear message from this hall: The fighting must stop. Humanitarian aid must flow. And navigational rights and freedoms must be fully restored in accordance with international law,” Guterres said.

On the UN system, criticized by Trump and others as bloated and ineffective after Washington withdrew from several UN agencies and slashed funding, Guterres said, “our mechanisms for collective action are under growing strain” and global institutions “continue to reflect the power realities and interests of a largely bygone age.”

Guterres used the address to bid farewell to most of the global leaders he has worked with over the last 10 years.

“So, on January 1st, when I am no longer Secretary-General, be sure of this. Wherever I will be, whatever I will be doing – I will keep championing the conviction that peace is possible,” he said. “I will continue to stand up for the values of the United Nations Charter and I will never, ever give up. Thank you.”

Reporting by Antoni Slodkowski; Editing by Howard Goller

The ECB has already lifted its key rate twice this summer but investors see another three or four moves in the next year as both oil and gas prices are now at its “severe” scenario and inflation could peak at around 4%, twice the bank’s target

International News via Reuters:

Oil prices are an increasingly important indicator for ECB policymakers in setting interest rates but other factors also play a crucial role, Bundesbank President Joachim Nagel said on Tuesday after markets raised rate-hike bets on expensive energy.

The ECB has already lifted its key rate twice this summer but investors see another three or four moves in the next year as both oil and gas prices are now at its “severe” scenario and inflation could peak at around 4%, twice the bank’s target.

ECB President Christine Lagarde and Vice President Boris Vujcic have both pushed back on those bets, arguing that rates do not move in lockstep with oil prices. Their remarks suggested the bank may wait until December to pull the trigger next.

“It’s definitely not the only indicator but it’s become a more relevant indicator over the last four years, this is for sure,” Nagel told an event hosted by London’s Society of Professional Economists. 

“It is obvious that we in governing council have to look at it and we have to take it into account when we take our decisions,” he said about oil prices.  

Still, he kept open the door to more rate hikes. He said rates, now at 2.5%, are in a territory that neither restrict economic growth nor stimulate it.

“I cannot exclude that if we are confronted with higher energy prices like this, that we have to go into the mild restrictive territory of monetary policy,” he said.

But he played down some worries about second-round inflation effects, arguing that the labour market was far softer than in 2022, when an energy-price-led inflation fuelled increasing wage demands, leading to a wage-price spiral.

He also said there were no significant second-round effects in the data.

For now, the ECB needed to maintain its approach of making decisions meeting by meeting, Nagel said.

This means that policy needs to be somewhere between “constructive ambiguity,” or intentional policy vagueness, and setting “forward guidance” or making explicit commitments about future policy moves, Nagel said.

Reporting by David Milliken; writing by Balazs Koranyi; Editing by David Gregorio

Canada is giving C$100 million in international assistance for Palestine, Prime Minister Mark Carney said on Tuesday

International News via Reuters:

Canada is giving C$100 million in international assistance for Palestine, Prime Minister Mark Carney said on Tuesday.

Carney told reporters at the United Nations that C$80 million was for humanitarian aid to alleviate immediate human suffering, and C$20 million was to support peace and security capacity building.

Reporting by David Ljunggren, editing by Promit Mukherjee