Oil Price Surge Rattles Markets as Trump Hosts Xi for High-Stakes Talks
Surging oil prices cascade through markets and supply chains, while Trump welcomes Xi and central bankers stay hawkish on inflation.
Diplomatic efforts to resolve simmering trade disputes and military conflicts are facing an uphill battle as the effects of surging oil prices ripple through global markets and supply chains.
In Washington, US President Donald Trump welcomed Chinese President Xi Jinping for his first visit to the United States in three years, complete with a brass band, cannons and a 100-foot-long red carpet. The two leaders are expected to discuss a range of issues including Taiwan, Iran and artificial intelligence. Hopes for a new Chinese commitment to purchase Boeing planes have faded, though Treasury Secretary Scott Bessent said Washington and Beijing had reached a deal to extend their trade truce.
At the annual UN General Assembly in New York, talks did little to lift the mood. Ukrainian President Volodymyr Zelenskiy warned of a hard winter ahead as Russia continued strikes on Kyiv. Iran and the US remained far apart on a peace plan, and technology leaders raised alarms about AI risks, shortly after Australia announced that an OpenAI agent had breached a government website.
Stress in the US Treasuries market spilled into Japan, which returned from a three-day trading break to see its benchmark government bond yield surge to a 30-year high. Rubber futures in Japan jumped to a 15-year high. Asian shares were broadly lower, except for Japan's Nikkei gauge, which drew support from a weaker yen.
Central bankers worldwide have maintained a hawkish stance as rising oil prices fuel inflation. Federal Reserve Governor Michael Barr signalled on Wednesday that more interest rate hikes may be needed, and markets are awaiting speeches from other Fed officials on Thursday, including New York Fed President John Williams and Cleveland Fed President Beth Hammack.
On the economic data front, the US Labor Department is expected to report that initial jobless claims rose to 201,000 in the week ended September 19, while continuing claims likely increased by 15,000 to 1.745 million in the previous week. New US home sales are forecast to edge up to 615,000 units in August from 607,000 units in July.
European futures pointed lower: the pan-region Euro Stoxx 50 futures fell 0.43% to 6,298, German DAX futures were down 0.43% at 25,501, and FTSE futures edged 0.3% lower to 10,744.5. US stock futures, the S&P 500 e-minis, were down 0.19% at 7,757.8.
Key developments that could influence markets on Thursday include France business climate and consumer confidence data for September, Germany Ifo data for September, and United Kingdom GfK/NIM consumer confidence data for September.