TMGM Daily Market Breakfast: 1 September 2026

Morning Snapshot

• Oil prices remained elevated as U.S.-Iran tensions intensified, Brent traded above $90 a barrel, WTI rose toward $87, and a tanker was reported struck by three projectiles while leaving the Strait of Hormuz.
• Federal Reserve Chair Kevin Warsh’s Jackson Hole remarks kept the possibility of further tightening in focus, with markets pricing about 15bp of September tightening versus roughly 8bp before the speech and the U.S. dollar holding modest gains.
• Japanese policy expectations stayed in focus as USD/JPY traded just below 160, Japan’s 10-year government bond yield hit 3% for the first time since 1996, and markets priced a 92% chance of a September Bank of Japan rate increase.
• Japanese Finance Minister Satsuki Katayama said she confirmed with U.S. Treasury Secretary Scott Bessent that continued, coordinated action on foreign exchange is needed.
• China’s August data and policy signals pointed to a still-uneven recovery, with manufacturing PMI rising to 49.8 from 49.2, non-manufacturing remaining weak, and officials drafting additional fiscal and financial support for the second half.
• China also announced property-market reforms including tighter presale rules, a greater shift toward completed-home sales and an extension of maximum individual mortgage terms to 40 years from 30 years.
• U.S. equities came under pressure as the Dow Jones Industrial Average traded near 53,250, roughly 300 points lower on the session, amid the latest Middle East escalation.
• Gold slipped back after a brief rebound, with the metal struggling to hold above the previous session’s bounce from below $4,400 as higher Fed hike bets and a firmer dollar weighed on prices.
• Eurozone inflation data were in focus ahead of the August flash HICP release, while the euro traded subdued against the yen around 185.50.

Market Developments

Energy

Brent crude traded above $90 a barrel, while WTI rose for a second straight day and traded around $85.60 to $86.95, with one report citing a 1.76% daily gain and another describing a roughly 2.5% rise on the session as Middle East supply risks intensified.

Foreign Exchange

The U.S. dollar index was up about 0.3% since Friday’s open after a 0.5% rise on Friday following Chair Warsh’s Jackson Hole speech, while USD/JPY traded just below 160 and EUR/JPY hovered around 185.50.

Rates & Metals

Japan’s 10-year government bond yield reached 3% for the first time since 1996, front-end yields across G10 rose, and gold retreated after bouncing from below $4,400, pressured by firmer Fed tightening expectations and a stronger dollar.

U.S. Equities

The Dow Jones Industrial Average traded near 53,250, about 300 points lower on the session, after U.S. strikes on Iranian rocket launchers and subsequent attacks on bases in Jordan and assets in the United Arab Emirates unsettled risk sentiment.

Geopolitics & Energy

Oil Holds Near Recent Highs as U.S.-Iran Escalation Disrupts Hormuz Shipping

Oil markets remained dominated by Middle East tensions after U.S. forces struck Iranian rocket launchers that Washington said were preparing to send mines into the Strait of Hormuz, prompting Iranian missile and drone attacks on two air bases in Jordan and on assets in the United Arab Emirates. President Donald Trump said any U.S. strikes on Iran would be limited, after Axios reported that he and senior aides were considering limited action in Hormuz to prevent Iran from rebuilding radar and missile capabilities used to target ships.

Shipping risks intensified after the United Kingdom Maritime Trade Operations said a tanker reported being struck by three projectiles while sailing out of the Strait of Hormuz. U.S. Central Command said forces were monitoring the area closely and remained ready to protect commerce through the waterway, which carries a large share of global oil and LNG flows.

Brent crude traded above $90 a barrel, while WTI held above $85.50 and later climbed toward $86.95, extending gains for a second consecutive day. Reports during the session described WTI as up 1.76% on the day and roughly 2.5% higher on the session. Market commentary in the reporting window also pointed to falling inventories, rising transport costs and emerging diesel shortages as constraints that have kept geopolitical risk embedded in prices.

Trump Cites Venezuela Oil Deal as Energy Costs Stay Elevated

President Trump said the United States had struck a deal with Venezuela to secure majority control of more than 65 billion barrels of oil reserves. He said the agreement would come at no cost to U.S. taxpayers and would strengthen bilateral ties while helping to lower gasoline prices.

The announcement came as energy costs remained elevated, with one report citing U.S. gasoline prices around $4.09 a gallon and WTI sharply higher since the conflict with Iran began. No official government document or further detail on the legal terms, timing or implementation of the Venezuela agreement was provided in the reporting window.

Macroeconomics & Central Banks

Warsh’s Jackson Hole Message Keeps September Fed Debate Open

Federal Reserve Chair Kevin Warsh used his Jackson Hole speech to stress that inflation remains too high and that the central bank still has “work to do” to return inflation to its 2% target. He said short-term interest rates remain the Fed’s primary policy tool and signalled openness to further rate increases unless underlying inflation improves convincingly.

The remarks shifted market pricing, with one report saying markets now price around 15 basis points of tightening for the September FOMC meeting, up from about 8 basis points before the speech. The U.S. dollar index rose 0.5% on Friday in response and was still up about 0.3% since Friday’s open after part of the move retraced, while front-end yields across G10 moved higher.

Longer-dated Treasury yields were described as falling after the speech, reflecting lower longer-term inflation and policy-risk premia even as near-term hike expectations increased. Several reports also noted that the next round of U.S. data, including the 4 September employment report and upcoming CPI figures, remains central to the September decision.

BoJ Tightening Expectations Build as Japan Yields Reach 3%

Japanese policy expectations remained a major focus after Japan’s 10-year government bond yield reached 3% for the first time since 1996 and USD/JPY traded just below 160. Markets were described as pricing a 92% chance of a September Bank of Japan rate hike, with attention turning not only to the next meeting but also to how officials communicate the broader path of rate increases.

Reports in the period said U.S. officials had urged Japan to raise interest rates. NHK reported that U.S. Treasury Secretary Scott Bessent told Finance Minister Satsuki Katayama and Bank of Japan Governor Kazuo Ueda on the sidelines of the G20 meeting in North Carolina that Japan’s next step should be to raise rates, while other comments attributed to Bessent said recent yen moves were well contained rather than disorderly.

Japanese macro data cited in the reporting window showed industrial production flat in July, with shipments up 2.2% month on month, inventories up 0.5% and the inventory ratio down 1.7%. Those figures, together with resilient housing and commerce indicators referenced in the coverage, were presented as supporting the view that Japan has exited deflation and that policy normalization remains in play ahead of the BoJ’s 17-18 September meeting.

Japan and U.S. Reaffirm Need for Coordinated FX Action

Japanese Finance Minister Satsuki Katayama said she confirmed with U.S. Treasury Secretary Scott Bessent that continued, coordinated action on foreign exchange is needed. The statement added to market focus on official coordination as the yen remained under pressure near 160 per dollar.

The comments came alongside broader discussion of U.S.-Japan policy coordination, with Bessent separately described as viewing recent yen moves as contained rather than disorderly. That combination left markets balancing the prospect of further policy normalization by the Bank of Japan against the possibility of official action if currency moves intensify.

China Recovery Stays Uneven as Easing Pressure Builds

China’s latest data and policy signals pointed to a still-uneven recovery. Manufacturing PMI rose to 49.8 in August from 49.2 in July, with large firms returning to expansion at 50.6 and export orders moving back into expansion territory, but non-manufacturing activity remained weak and broader PMI readings were still described as showing two consecutive months of contraction.

Growth was said to be tracking below the official 4.5% to 5.0% full-year target range after a sluggish start to the second quarter. On the fiscal side, government spending contracted 4.4% year on year in July, an improvement from June’s 11.9% decline, and Vice Finance Minister Liao Min said new coordinated fiscal and financial policies were being drafted for deployment in the second half.

The People’s Bank of China’s second-quarter monetary policy implementation report reaffirmed a moderately loose stance, pledged stronger counter-cyclical adjustments and signalled greater use of overnight reverse repo operations as a liquidity-management tool. Coverage in the reporting window also said the case for pre-emptive easing before year-end had strengthened, including the possibility of reserve requirement ratio and rate cuts.

China Unveils Property Reforms and Extends Mortgage Terms

Chinese authorities announced a package of property-market reforms aimed at strengthening homebuyer protections and accelerating a shift toward a new housing development model. The measures tighten presale rules, promote completed-home sales and require stronger safeguards for buyer funds through regulated accounts and handover-with-certificate practices.

For homes sold after completion, mortgage disbursement will occur only after sales registration, while funding for presold projects will be delayed until formal completion registration. Authorities also extended the maximum term of individual home loans to 40 years from 30 years.

Regulators said developers’ reasonable financing needs should be better met, with greater emphasis on project viability and broader access to equities, bonds, asset-backed securities and REITs. The package was presented as an effort to reduce delivery risks, improve transparency, raise housing quality and support safer transactions.

Eurozone Inflation Release Draws Focus as Euro Trades Softly Against Yen

Eurozone August flash HICP inflation data were in focus during the European session, with the release scheduled for 09:00 GMT. Ahead of the figures, the euro traded subdued against the Japanese yen around 185.50, while broader FX coverage also noted that the U.S. dollar had struggled to fully extend its post-Jackson Hole gains.

The inflation release was being watched as a key near-term data point for euro-area markets, with the euro holding only modest gains against the dollar in earlier trading and remaining under mild pressure against the yen.

Markets

Dow Slips as Middle East Escalation Hits Risk Sentiment

U.S. equities came under pressure as the latest Middle East escalation unsettled risk appetite. The Dow Jones Industrial Average traded near 53,250, roughly 300 points lower on the session, after U.S. forces struck two Iranian rocket launchers on Larak Island and Tehran responded with attacks on bases in Jordan and on assets in the United Arab Emirates.

The move reflected a broader deterioration in sentiment during a session marked by higher oil prices and renewed concern over shipping and energy security around the Strait of Hormuz.

Gold Retreats as Firmer Fed Tightening Bets Lift the Dollar

Gold struggled to build on the previous session’s rebound from below $4,400 and attracted fresh selling in Asian trading. The metal was described as pulling back from a one-and-a-half-week low as rising bets on a September Fed rate increase, together with escalating U.S.-Iran tensions, supported the U.S. dollar.

The retreat in gold came alongside a broader move higher in front-end yields and a modest gain in the dollar index after Chair Warsh’s Jackson Hole speech reinforced the Federal Reserve’s inflation-fighting stance.

Upcoming Key Events

• Bank of Canada Policy Decision — null: The Bank of Canada is scheduled to meet on 2 September, with market and analyst attention focused on whether it keeps the overnight rate at 2.25%.
• U.S. Employment Report — null: The next U.S. employment report is due on 4 September and was cited as a key input into the Federal Reserve’s September policy debate.
• Bank of Japan Policy Meeting — null: The Bank of Japan’s 17-18 September meeting is in focus as markets price a high probability of a rate increase and watch for guidance on the broader path of normalization.