Peace-talk optics shift, but Kyiv holds the line
Vladimir Putin’s apparent demand that Ukraine cede all territory seized by Russia – plus additional areas – remains a non-starter for Kyiv and European leaders. Their stance will be on display in Washington later today when President Zelenskiy meets US President Donald Trump alongside European counterparts, after Trump’s Friday meeting with Putin in Alaska signalled a preference for a peace deal over a ceasefire first.
Oil eases as sanction risk fades
Crude prices initially softened as traders judged the threat of fresh US sanctions or tariffs on Russian oil had receded, with Brent down 0.3% before recovering.
The pullback reflects a modest unwinding of supply-risk premia at the start of a data-heavy week before buyers stepped in.
Asia leads risk-on tone but Europe and Wall St don’t follow its lead
Equities were broadly firmer in Asia, where Japan and Taiwan set fresh records and Chinese blue chips climbed to a 10-month high.
European stocks traded softer at the open, though, with their US counterparts also expected to open slightly lower as concerns about Monday’s Trump-Zelenskiy meeting and its repercussions grow. They nonetheless remain close to record territory.
The FTSE 100 was hardly changed, down around 0.09% in the morning, as miners Anglo American, Glencore and Rio Tinto and financials HSBC, Legal & General and Aviva weighed on the index but industrials Babcock and BAE Systems and consumer discretionary stocks Persimmon and Games Workshop propped up the index.
Earnings cushion valuations; US retailers in focus
A solid results season continues to underpin multiples: Goldman notes S&P 500 earnings-per-share (EPS) up 11% year-on-year (YoY) and 58% of companies raising full-year guidance. This week’s reports from Home Depot, Target, Lowe’s and Walmart will offer a timely read on consumer health.
Jackson Hole sets the macro agenda
The Kansas City Fed’s Aug 21-23 Jackson Hole symposium is the week’s main macro event, with Chair Jerome Powell slated to discuss the outlook and policy framework with no questions and answer session indicated as yet.
Futures put the odds of a September Fed rate cut at around 85%, down from near certainty last week amid a much higher-than-expected US producer price index (PPI) print.
Anything less than dovish from Powell could jar duration and credit. European Central Bank (ECB) President Christine Lagarde and Bank of England (BoE) Governor Andrew Bailey are also due on panel discussions.
Bonds, dollar and the curve
Fed-cut expectations are anchoring short-dated Treasury yields, but longer maturities remain pressured by inflation worries, deficits and the politicisation of policy, producing the steepest US yield curve since 2021.
European bonds face similar pressures as defence-spending needs rise, pushing German long-term yields to 14-year highs.
The US dollar slipped 0.4% last week to 97.85 on the US Dollar Basket, reflecting softer US rate expectations.