US equity-index futures saw a slight increase in early trading, with S&P 500 futures advancing 0.2%. This movement occurred as markets awaited US-China talks scheduled ahead of a leaders' summit later in the week. The dollar held a narrow range against the yen and yuan, with potential for amplified moves due to thin liquidity as Japan observed a holiday. The Dow Jones Industrial Average had experienced its third consecutive losing week, dropping 1.7%, while the S&P 500 was off about 0.1%. Only the tech-heavy Nasdaq posted a gain of 0.7% in the previous week.
Oil prices continued their decline, with Brent trading near $104 a barrel after a three-day drop, and West Texas Intermediate falling below $100. This drop was largely attributed to improved shipping conditions through the Strait of Hormuz, easing concerns about supply risks in the Middle East and contributing to a potential recovery in the Dow Jones futures. US Central Command reported a significant increase in oil and cargo shipments through the Strait, reaching their highest level in six months, following enhanced naval protection and mine-clearance operations.
The broader market context includes investor concerns over sticky inflation and elevated bond yields, with the 10-year Treasury yield hovering close to 5%. The Federal Reserve had recently hiked interest rates for the first time in three years, contributing to the Dow's recent losses. Jeffrey Roach, chief economist at LPL Financial, noted that the same geopolitical conflicts inflating energy prices are also keeping the Federal Reserve hawkish, and that Beijing's fiscal calculations are similarly impacted by oil market conditions.
