Global Markets Brace for Key Data Amid Geopolitical Tensions and Rising US Bond Yields

Global financial markets are entering a busy week, with investors balancing geopolitical developments against crucial macroeconomic data releases. High oil prices and rising US Treasury yields continue to pressure stock markets. Concerns over AI safety have resurfaced following federal website breaches, prompting OpenAI to pause training new AI models. The financial performance of chipmaker Micron, due Wednesday, will also impact the AI sector.

Geopolitically, markets are reacting to President Trump's rejection of Iran's proposal to open the Strait of Hormuz. Reports suggest the US may resume attacks on Iran post-November midterm elections. Details are also expected regarding the recent Trump-Xi meeting, which resulted in an extended trade ceasefire until January 10.

Key US macroeconomic data this week include employment and inflation figures, which will influence interest rate expectations. The September jobs report is due Friday, preceded by the August JOLTS job openings survey on Tuesday and the ADP employment report on Wednesday. Also on Wednesday, the Federal Reserve's preferred inflation gauge, the PCE price index for August, will be released, alongside second-quarter GDP growth estimates.

In Israel, the Tel Aviv Stock Exchange will operate on a shortened schedule due to the Sukkot holiday, closing early on weekdays and remaining closed on Friday. The TA-35 index lost 1.1% last week, the TA-90 fell 3%, and the TA-125 dropped 1.5%. The oil and gas sector led declines, down 4%, partly due to oil price volatility and NewMed Energy's cancellation of a $6.7 billion gas supply deal. The cleantech index also fell 4% amid rising US bond yields and interest rate hike expectations.

Wall Street closed the past week in positive territory, with the S&P 500 up 1.2%, the Nasdaq up 2%, and the Dow Jones up 0.3%. Meta's stock surged 13% following the launch of its new AI assistant, Muse. Analysts anticipate Micron's fourth-quarter earnings to more than tenfold, potentially causing a 9% stock move.

Despite headline gains, eight of the S&P 500's 11 sectors are in negative territory for September, with infrastructure, real estate, and financials seeing notable drops. Technology and communication services sectors are driving monthly gains. The equal-weighted S&P 500, however, is down 3.5% for the month, indicating underlying weakness.

The Israeli Shekel weakened by 0.8% against the dollar last week, closing around 3.05 NIS, attributed to global dollar strength and expected US interest rate hikes. Regional risk premiums, fueled by Houthi attacks on Saudi Arabia and fears of wider conflict with Iran, are also strengthening the dollar as a safe-haven currency. While Israel's current account surplus and high foreign exchange reserves may limit further Shekel depreciation, regional de-escalation could support its appreciation.

Brent crude oil remained unchanged at $104 per barrel, while WTI crude fell 8% to $92.40, influenced by Iran's proposal regarding the Strait of Hormuz, though Trump's rejection is expected to impact traders. Bitcoin is trading around $85,000, a more than eight-month high, with institutional adoption and ETF inflows cited as key factors for its future trajectory.

Economists anticipate the September US jobs report to show around 100,000 new jobs, a moderation from August's figures. A "good, but not great" report is expected to satisfy markets, while significant overheating could trigger negative reactions due to increased odds of an October rate hike. The PCE price index for August is projected to show a 0.4% monthly increase, with core inflation rising 0.3%, still well above the Fed's 2% target.

US long-term Treasury yields have surged to multi-decade highs, with the 10-year yield at 5.16% and the 30-year at 5.5%. The rapid pace of this increase is raising alarms, with historical analysis suggesting such rapid yield spikes often precede economic crises, including the 1987 stock market crash, the 1997 Asian financial crisis, the 2000 dot-com bubble, and the 2008 subprime crisis. Experts warn that high yields increase deficits, harm the housing market, and impact the AI sector's financing.