Morning Bid Americas-Dealjà vu

Moving over to energy, all the oil majors, including Exxon, Chevron, TotalEnergies and BP, have now reported second-quarter earnings – and refining profits have been eye-popping. Exxon posted downstream profits of $5.5 billion in the second quarter, its strongest result since 2022, driven by record diesel production, while Chevron's downstream earnings climbed to $4.9 billion, their highest level this decade. And BP's refining-indicator margin, a measure of global refining profits, rose to $30 per barrel in the second quarter from $12 a year earlier. These wide margins reflect the extreme shortage in refining capacity, caused by the limited supply of crude exiting the Strait of Hormuz, Iranian attacks on refineries across the Gulf, and Ukrainian strikes on Russian energy facilities. But given that the long-term fundamentals in the refining sector remain unsupportive, this "golden era" is unlikely to last. In other energy news, the seven members of OPEC+ that have undertaken voluntary output cuts – Saudi Arabia, Russia, Iraq, Kuwait, Algeria, Kazakhstan and Oman – on Sunday agreed to increase production by 188,000 barrels per day in September. For the moment, this change doesn't really matter, as the producers couldn't meet their previous quotas given the war-related disruption. But the announcement is still important because it signals that production will likely ramp up quickly whenever the Strait of Hormuz finally reopens. There were indications this week that this could happen soon, with Iran signalling it was nearing a deal with Oman regarding oversight of the critical waterway. The proposed agreement would give Tehran control over ships entering the Gulf through Hormuz, sources told Reuters on Wednesday. If U.S. President Donald Trump were to accept this arrangement, it would be a huge concession to Iran, meaning any deal centred on this plan would be fragile to say the least. Yet oil markets appear to be betting that everything will work out just fine. Brent crude prices drifted back toward $80 a barrel by midweek, roughly where they traded before the signing of the short-lived U.S.-Iran ceasefire in June. However, news on Thursday that Yemen's Iran-aligned Houthis had attacked Saudi Arabia caused oil prices to rise above that level, though only modestly. If the crude market's optimism about seeing a sustainable deal implemented was misplaced in June, it appears even less understandable now. The global energy system is far more fragile today than it was two months ago. Inventories are further depleted, the trapped supply available to flood the market has shrunk, and the conflict has expanded beyond Hormuz. Can the energy system continue to defy expectations with its adaptability? We shall see. Finally, investors have been getting more insight into the U.S. labor market this week in the lead-up to today's release of the July nonfarm payrolls report. ADP figures on Wednesday showed private employers added 44,000 workers last month, slowing from 95,000 in June. Friday's release is expected to show that the U.S. economy added 80,000 jobs in July, following a 57,000 gain in June, with no change to the 4.2% unemployment rate, according to economists polled by Reuters. Futures markets are pricing in a little more than a 50% chance of a rate hike at the Federal Reserve's September meeting, down from a near certainty only a few weeks ago, reflecting the reduction in crude prices and Warsh's mixed signals at the recent Fed meeting. But inflationary pressure may still be building from a potent mix of still-elevated fuel costs, loose financial conditions, fiscal stimulus, and booming investment. With unemployment still low and inflation above target for five years running, it's reasonable to ask whether the "cautious" Fed may inadvertently be allowing the economy to overheat. An ultra-soft jobs report today might change that view – but only slightly. In currency markets, the U.S.-Japan FX intervention that unfolded late last week appears to have calmed markets – at least for now. The yen is currently trading around the 158-per-dollar range, compared to the 40-year low near 164 per dollar hit before the joint action. That is still weaker than at the start of the week, though, and for a longer-lasting fix, Japan will need to address its underlying issues, namely concerns about overly loose monetary and fiscal policy as well as central bank credibility. Many questions about the intervention remain, not least the head-scratching choreography surrounding it. But the bigger worry is what it could signal. For the first time in recent memory, U.S. Treasuries, Japanese government bonds and the U.S. dollar/yen exchange rate – one of the most important in the world – have all been under pressure simultaneously, at the same time that central bank credibility issues have risen in both countries. While no one should expect this perfect storm to lead to an imminent crisis, the historic U.S. action last week may signal that Washington believes the risk of an "accident" has increased. Tech earnings hogged the spotlight this week, as both SpaceX and chipmaker AMD failed to impress investors despite revenue beats, with concerns remaining about the durability of the AI spending spree. Meanwhile, the prospect of yet another interim U.S.-Iran deal pushed down crude prices, but optimism appeared to be fading heading into the weekend. This week's earnings bonanza extended well beyond the tech sector, with notable reports coming from the likes of pharma giants Eli Lilly and Merck, oil major ConocoPhillips, industrial bellwether Caterpillar and media group Disney. Results were mostly impressive, as might be expected when aggregate annual S&P 500 earnings growth is on track to hit nearly 50% this quarter, according to LSEG data. At the same time, some of the week's post-earnings stock slides were also eye-catching. AMD closed 7% lower on Wednesday, while high-flying data storage companies Sandisk and Western Digital slumped on Thursday after posting their own revenue beats. SpaceX shares fell nearly 14% on Wednesday after its first earnings release as a public company, reflecting investor anxiety about its massive AI outlays, but Elon Musk's satellite company rebounded on Thursday. Concerns remain about whether the expiry of the first share lockup period on Thursday could further pressure the stock.

Morning Bid Americas-Dealjà vu

Oil markets and refining margins

Labor market data ahead of payrolls

Yen intervention and bond-market pressure

Tech earnings and broader quarterly results

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