Daily Brief Macro: Monday Macro: Beware Diesel Prices & Bans and more

• The week ahead features a fair dollop of labour market data releases in the all-important US economy, topped off by September’s employment report (Fri).
• On Tuesday, the latest US JOLTS report will update labour demand and could influence expectations about how far the Fed will need to go in its renewed tightening cycle.
• On Wednesday, the latest US PCE inflation figures will be released alongside personal income and spending data, ADP employment numbers and the final estimate of second-quarter GDP. 

• Asia’s spare capacity is filling gaps left by tighter US, European and Middle East supply, but recovering demand and fourth-quarter maintenance will test its limits.

• Traditional suppliers are losing export availability, giving Asian producers more room to meet requirements in the US, Europe and other overseas markets.

• The response spans the region, with South Korea, Taiwan, India, Singapore and China all sending cargoes beyond Asia.

• The world economy no longer enjoys the benefits of low inflation. US equity investors are embracing the eventual return of low inflation due to the rollout of artificial intelligence.
• Geopolitics has contributed to a pivot away from globalisation with inflationary implications via supply chain recalibration. Deteriorating fiscal positions, partly due to higher defence commitments, are also producing inflationary pressures. 
• The media has concentrated on the Fed’s role in contributing to higher US interest rates, but the strong economy has also played a role due to rising corporate credit demand.

• Kuwait passed legislation for sukuk borrowing and a new mortgage law.                 
• Bahrain’s GDP fell in Q1 by 3.8 %. FX reserves at their lowest.
• Oman, the only GCC country to benefit from Trump’s war.

• After the initial surge in oil prices yesterday reflecting President Trump’s “rejection” of Tehran’s “proposal” of essentially a seven-day MOU, prices retraced substantially.  
• The pullback appeared to reflect word that Iran Foreign Minister Abbas Araghchi met with mediators in New York after stating that Iran is open to “real diplomacy.”                                         
• At this juncture, however, we are retaining our scenario discussed in recent reports, i.e. that there is a relatively high probability of a return to military conflict.          

• Crude oil futures were sliding lower on Friday following reports that US and Iranian officials were continuing talks on a deal to reopen the Strait of Hormuz, leaving Brent little changed on the week.
• Nov26 ICE  Brent futures were 1.9% lower at  $104.62/b (2045 BST), while Nov26 NYMEX WTI was at  $92.62/b , down 2.1% versus Thursday’s settle.
• According to Reuters, US and Iranian negotiators in New York are discussing a phased path to end the near seven-month conflict that would see Tehran reopen the Strait of Hormuz in exchange for Washington lifting its economic blockade of Iran.

Highlights

• Malaysia sees over 90% probability of very strong El Niño by October–December

• Vietnam sees 98% probability of very strong El Niño during October–December

• China’s rubber regions show sharply contrasting drought and rainfall risks