A look at the day ahead in European and global markets from Ankur Banerjee
After five months of tracking events in the Strait of Hormuz, investors are looking across the Arabian Peninsula as Iranian-aligned Houthis, who control areas near the Bab el-Mandeb strait in the Red Sea, open a new front in the crisis in the Middle East.
The escalating and widening conflict has sent Brent futures to $96 per barrel, the highest since early June, as investors worry about depleting stockpiles after Houthis against Saudi Arabia earlier this week. The threat has led to tankers changing course in the Red Sea, ship-tracking data showed.
Surging oil prices have revived fears of inflation, taking short-term Treasury yields to the highest in 17 months as traders wager a rate hike from the Federal Reserve could come soon. Traders are now fully pricing in a hike in September.
While geopolitical tensions and inflation fears simmer, markets are also keeping an eye on earnings from tech bellwethers Alphabet (GOOGL.O) and Tesla to gauge if the vast capital spending from AI hyperscalers is finally beginning to yield results.
That spells good news for Asian chipmakers, most of whom may end up pocketing billions to build that infrastructure. South Korea's KOSPI (.KS11) rose nearly 4%, led by SK Hynix (000660.KS) and Samsung Electronics (005930.KS). European futures point to a muted open so the mood may darken soon as investors return to fretting about valuations, profit growth and returns on huge capital spending.
More earnings this week will provide a clearer picture of where we stand in the profitability vs capital spending tug of war.
Key developments that could influence markets on Thursday:
Economic events: ECB policy decision, euro zone consumer confidence data for July
