Weekly house view | Biggest oil deal in history
The week in review
President Donald Trump said the US had struck a deal to take control of 65 bn barrels of Venezuelan oil in what he called “the biggest oil deal in world history”. Oil is moving through the Strait of Hormuz, but fuel shortages are nonetheless becoming evident – as seen with higher prices for gasoline in the US and for diesel in Europe, and sales limits in Russia.
Moscow warned it could strike British military targets in response Ukrainian attacks on targets inside Russia using British missiles.
At the Jackson Hole gathering of central bankers, Federal Reserve Chair Kevin Warsh signalled the Fed is prepared to raise interest rates if inflation does not slow soon. “We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed,” he said. “Otherwise, we have work to do.”
The US announced “economic D-Day” against Iran, threatening to stop US dollar funding to those laundering Iran's money. The US is also reportedly looking at imposing a 7.5% tariff on Chinese goods over allegations of excess manufacturing capacity before a planned summit between Xi Jinping and Trump next month.
The Reserve Bank of Australia reduced its target for US dollar foreign exchange reserves from 55% to 45%, reallocating the funds into euros.
In the corporate world, Nvidia reported stronger-than-expected results and forecast revenue growth of about 70% in its next fiscal year. The S&P 5001 gained 0.5% on the week.
Quote of the week
“Governments defending prices against fundamentals always lose,” Stanley Druckenmiller, US Treasury Secretary Scott Bessent's former mentor, wrote of Bessent’s bond buyback plan. Media reported the Treasury could use its near USD 1 tn General Account to help fund increased government bond purchases.
Key data
The core personal consumption expenditures price index (core PCE), the Fed’s preferred inflation measure, rose 0.2% month-on-month in July and by 3.3% year-on-year – neither hot, nor cold. US durable goods orders rose by 1.1% in July, surpassing the expected 0.5% increase.
Germany’s IFO gauge of business sentiment rose more than expected. Headline inflation jumped in France and Spain in August on higher energy costs, but core price pressures eased. A suggestion by far-left French presidential candidate Jean-Luc Mélenchon that France cancel part of its national debt weighed on French bonds and equities.
