Source attribution: This briefing is compiled from publicly available information (see references).
Market Mood: 🔴 Risk-Off The G7 emergency release of strategic reserves and the US decision to drop its threat of a diesel export ban signal tight energy supply; US Treasury yields rose to their highest since 2002 and euro area inflation hit a near three-year high, with risk aversion and policy uncertainty coexisting. Drivers: G7 and partners to release up to 100 million barrels of strategic petroleum reserves / US September nonfarm payrolls rose only 29,000, unemployment rate up to 4.2% / Iran war pushes US Treasury yields higher, Brent oil price breaks $100 / Euro area September inflation rises to 3.8%, a near three-year high
TL;DR - French President Macron announced that the G7 and partners will release up to 100 million barrels of strategic petroleum reserves. - US September nonfarm payrolls rose by only 29,000, far below expectations, and the unemployment rate rose to 4.2%. - Brent crude broke back above $100 per barrel on Thursday, and US 10-year and 30-year Treasury yields rose to their highest since 2002.
Summary Under US pressure, the G7 agreed to release up to 100 million barrels of strategic petroleum reserves within four months, starting with diesel stocks, to curb surging diesel prices; the US also dropped its threat to ban diesel exports. US September nonfarm payrolls rose by only 29,000 and the unemployment rate climbed to 4.2%, leading markets to increase bets that the Federal Reserve will hold steady in October.
Secondary Highlights
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Key Transmission Paths - G7 releases up to 100 million barrels of strategic reserves -> expected increase in crude and diesel supply, pressuring prices lower. - Iran war -> Strait of Hormuz risk -> oil price breaks $100 -> US Treasury yields surge - US September nonfarm payrolls only 29,000 -> rate hike expectations cool -> dollar and short-end rates lower - Energy prices surge -> euro area inflation 3.8% -> ECB tightening expectations rise
Contradictions / Divergences - In reports on the G7 reserve release, the list of participating countries, release quotas. - US diesel export ban: RT reported that the US is using the ban to pressure the EU. - There are differences in Germany's position: reports say Germany is reluctant to release reserves. - Market expectations for the employment data vary (84,000/85,000/90,000). - Some diplomats believe the G7 statement may merely reaffirm the March commitment.
Lessons Learned - In energy reserve release events, there is often a gap between the 'announced scale' and actual volumes released. - The transmission path from geopolitical conflict (the Iran war) to interest rate markets is not only through energy prices. - The same set of employment data was classified by multiple sources under different themes (Demand Shock and Economic & Monetary Policy).
Sources China News Service / Le Monde International / POLITICO Europe / Le Parisien Politics / Die Zeit Politics / RT News / Yahoo News - World / Franceinfo Politics RSS / The New York Times / El País Internacional / EL PAÍS América / Naftemporiki / Poder360 / BBC News (Business) / Valor Econômico Politics