Waller's Dovish Tone Fuels US Market Rally, Oil Surges on Mideast Tensions
05 September 2026 · Morning
New York markets surged after Federal Reserve Governor Christopher Waller indicated he would support holding interest rates in September if August inflation data showed moderation, easing fears of continued aggressive tightening.
The S&P 500 climbed 1.06% and the Nasdaq rose 1.40%, while the dollar weakened and bond yields fell, reflecting a shift in market sentiment towards reduced rate hike probabilities.
However, underlying inflationary pressures persist, with August ISM Non-Manufacturing PMI showing strong demand and rising input costs, alongside a six-week high for WTI crude oil at $91.30 due to escalating US-Iran conflict.
Asian markets, which closed before Waller's remarks, are expected to react to the overnight rally in today's trading, with structural market issues still a key focus.
Central banks across Europe are navigating complex inflation dynamics, with the Bank of England's chief economist advocating for swift rate hikes to preempt secondary effects, while the ECB concludes its shortest hiking cycle in 15 years.
Global Markets
Detail
S&P 500
Closed at 7,747.71 on Sep 3, reflecting a broad market rebound.
+1.06%
Nasdaq
Ended at 26,584.05 on Sep 3, leading the gains in technology stocks.
+1.40%
STOXX 600
Finished at 649.11 on Sep 3, showing positive movement in European equities.
+0.49%
Nikkei 225
Closed at 64,214.26 on Sep 3, prior to the US market rally.
-0.17%
CSI 300
Ended at 4,552.58 on Sep 3, with modest gains before US market news.
+0.10%
KOSPI
Closed at 6,579.48 on Sep 3, ahead of the US market's significant rally.
+0.26%
Hang Seng
Finished at 25,213.31 on Sep 3, showing a slight decline.
-0.39%
Dollar Index (DXY)
Fell to 98.99 on Sep 3, as risk sentiment improved.
-0.59%
USD/JPY
Traded at 155.82 on Sep 4, showing minimal change.
+0.01%
EUR/USD
Traded at 1.16 on Sep 4, with the Euro slightly weaker against the dollar.
-0.01%
USD/KRW
Closed at 1,355.97 on Sep 3, with the Korean Won strengthening.
-0.19%
USD/CNY
Closed at 6.72 on Sep 3, with the Yuan showing a marginal gain.
-0.01%
US 10-Year Yield
Fell to 4.772% on Sep 3, reflecting reduced rate hike expectations.
-0.8bp
US 2-Year Yield
Declined to 4.340% on Sep 3, indicating a more dovish outlook.
-3.1bp
Japan 10-Year Yield
Dropped to 2.948% on Sep 3, amidst global bond market movements.
-5.4bp
Germany 10-Year Yield
Decreased to 3.353% on Sep 3, following broader bond market trends.
-2.0bp
Korea 10-Year Yield
Fell to 4.363% on Sep 3, aligning with global yield declines.
-4.1bp
US HY Spread
Widened to 266bp on Sep 2, suggesting a slight increase in credit risk perception.
+1.0bp
WTI
Rose to $91.30 on Sep 3, hitting a 6-week high amid Middle East tensions.
+0.32%
Gold
Jumped to $4,477.58 per ounce on Sep 3, benefiting from a weaker dollar and lower yields.
+1.96%
Copper
Increased to $6.66 on Sep 3, reflecting improved risk appetite.
+1.08%
VIX
Fell to 14.31 on Sep 3, indicating a significant reduction in market volatility.
-5.79%
United States
Fed Signals Potential Rate HoldSep Hike Odds <50%
Fed Governor Christopher Waller stated he would support holding rates in September if August inflation data confirms a slowdown.
This remark caused market bets for a September rate hike to drop from 62% to around 50%, shifting the narrative from expected hikes to a potential pause in the tightening cycle.
The dollar weakened by 0.7%, the yen strengthened by 2%, and gold surged 2.3% to $4,488.54/ounce, while major US indices like the Dow (+1.18%), S&P (+1.06%), and Nasdaq (+1.40%) rallied, and the 10-year Treasury yield fell to ~4.76%.
US Services Sector Activity StrongISM PMI 55.4
The August ISM Non-Manufacturing Purchasing Managers' Index (PMI) rose to 55.4 from 54.1 in July, indicating robust activity in the services sector.
Strong demand drove new orders to a 3.5-year high, but input costs and prices paid also increased, signaling persistent inflationary pressures.
Despite the strong services data, employment indicators showed some weakness in non-manufacturing hiring, making Friday's US employment report crucial for the Fed's upcoming decisions.
US-Iran Tensions EscalateWTI $93.04
The conflict between the US and Iran intensified, with at least 13 Iranian military personnel reported dead from US airstrikes.
The US is increasing economic pressure through oil export blockades and restrictions on dollar transactions, with the UAE also cutting trade and financial ties with Iran.
Rising geopolitical risks in the Middle East pushed Brent crude to $97.29 (+1.7%) and WTI to $93.04 (+2.2%), marking a 6-week high and posing a renewed inflationary threat.
Waller on Rising Neutral RateR-star 1.65%
Fed Governor Waller suggested that the safety and liquidity premium of US Treasury bonds has been exhausted, reflecting increased capital competition and fiscal concerns.
The New York Fed's estimate for the neutral interest rate (R-star) was 1.65% in Q2, indicating that a rising neutral rate could be a structural factor behind higher Treasury yields.
Waller emphasized that economic growth alone cannot resolve the increasing US debt, highlighting the need for structural fiscal deficit reduction.
Auto Industry Calls for China Car BanLegislation Urged
The Alliance for Automotive Innovation, representing major manufacturers like GM, Ford, Toyota, and Volkswagen, urged Congress to pass legislation banning Chinese car imports by year-end.
The group's statement seeks to strengthen the Biden administration's existing restrictions on Chinese vehicles, recognizing the growing threat posed by Chinese automakers in the global market.
Markets & Commodities
Canada Services Sector ContractsPMI 46.8
Canada's August Services Purchasing Managers' Index (PMI) fell to 46.8, its lowest since February, signaling a contraction in the services sector (below 50).
Weak new orders were attributed to geopolitical tensions in the US and Middle East, along with trade uncertainties.
This contraction reflects broader economic challenges facing Canada.
Canada's Trade Surplus ShrinksC$769M
Canada's July trade surplus significantly narrowed to C$769 million, down from C$4.2 billion in the previous month.
This reduction was driven by a 2.3% decrease in energy and metals exports and a 2.2% increase in imports.
With the US accounting for 66% of Canada's total exports, the impending 50% tariffs from the US by late September are expected to further impact trade figures.
Brent Crude Rises$97/barrel
Brent crude oil prices climbed to $97 per barrel, exacerbating concerns about global economic slowdown.
This increase is linked to heightened geopolitical tensions and supply uncertainties, particularly from the Middle East.
The rising oil prices could contribute to inflationary pressures globally.
Japanese Yen Surges+2%
The Japanese Yen strengthened by 2% against the dollar in two days, marking its largest gain since early August.
This surge signals renewed expectations of intervention by Japanese authorities to support the currency.
The EUR/USD pair traded in a narrow range of 1.1588-1.1614, experiencing slight downward pressure.
Emerging Markets
Ukraine Peace Talks PossibilityWheat -3.6%
Russian President Putin stated at the Vladivostok Economic Forum that a peace agreement to end the war in Ukraine is possible, with several countries including the US and China supporting peace talks.
A Ukrainian foreign ministry official also expressed optimism for a new phase in peace efforts, marking a rare moment of simultaneous positive sentiment from both sides.
This easing of tensions regarding Black Sea grain supplies led to a 3.6% drop in Chicago wheat futures, falling to $7.46 1/4 per bushel.
Senegal Honors Bond Payments2048 Bond +2.5c
Senegal's economic ministry confirmed it has initiated coupon payments for its 2048 international dollar bond due September 13, signaling its commitment to international debt obligations despite an ongoing debt restructuring process.
The $2.2 billion, three-year IMF loan memorandum of understanding signed this week explicitly does not include a suspension of bond payments, bolstering investor confidence.
Following the news, Senegal's 2048 international bond rallied, rising 2.5 cents to 51.47 cents per dollar on Tradeweb.
Bolivia Resists IMF Austerity$1.9B Program
Bolivian civil society groups and labor unions continue to resist the government's proposed $1.9 billion IMF austerity program, linking it to diesel subsidy cuts and fuel shortages.
Representatives from nine civil and social organizations met in Cochabamba, near La Paz, to express concerns over austerity measures tied to the IMF loan, which is still awaiting approval from Congress and the IMF Executive Board.
The opposition stems from memories of harsh austerity experienced during IMF bailouts in the 1980s and 1990s, further compounded by the recent resignation of the finance minister, which has weakened investor confidence.
Poland's Rates to Remain StableHold Until Year-End
Iwona Duda, a member of the Polish Monetary Policy Council (MPC), indicated to Bloomberg that maintaining the current base interest rate until at least the end of the year is the baseline scenario.
This statement comes after Governor Adam Glapinski hinted at a potential 25 basis point cut after the summer break, suggesting other MPC members may be less inclined towards further easing.
Hungary's Rate Decision PendingSep Inflation Key
The Hungarian Central Bank announced that its decision on whether to pause interest rate hikes this month will be based on its September inflation forecast.
This official stance was a response to a Bloomberg report suggesting a potential halt to rate easing this month.
The central bank's approach underscores its data-dependent strategy in managing monetary policy.
Egypt's GDP Growth ForecastFY25/26 +5.1%
Egypt's cabinet announced a projected GDP growth rate of 5.1% for the 2025/26 fiscal year.
This forecast represents a 0.7 percentage point increase from the previous year's growth of 4.4%.
The upward revision signals a positive outlook for the country's economic performance.
India's RBI Dollar Inflows Boost Liquidity$127.23B Inflow
The Reserve Bank of India's special dollar deposit scheme attracted approximately $127.23 billion, exceeding expectations.
This led to a record high liquidity surplus of 9.70 trillion rupees (approx. $102.7 billion) in the Indian financial system.
The RBI is considering absorption tools like Variable Rate Reverse Repos (VRRR) to manage excess liquidity, fearing it could exacerbate inflation.
Indian Rupee Hits 10-Week High₹94.49/$
The Indian rupee reached its highest level in 10 weeks, closing at ₹94.49 per dollar, driven by RBI dollar inflows.
This marks the first time the rupee has reached this level since June 25, with a daily gain of 0.5%, the largest since July 27.
The rupee opened at ₹94.30, but dollar demand from importers limited some of the gains.
Indian Bond Yields Mixed Amid Conflicting Pressures10Y 6.9646%
Indian government bond yields were mixed, influenced by conflicting pressures from dollar inflows and surging oil prices.
The 10-year bond yield initially fell to 6.9323% in the morning due to dollar inflows but rebounded on inflation concerns from rising oil prices.
The 10-year bond (6.94% coupon, 2036 maturity) closed at 6.9646% (from 6.9754%), while the 5-year bond closed at 6.5216% (down 4 bps), showing relative strength in shorter maturities.
SEBI to Review Derivatives Settlement MethodologyMarket Manipulation Concerns
The Securities and Exchange Board of India (SEBI) plans to review its methodology for derivatives settlement prices.
Concerns arose regarding index discrepancies between exchanges, volatile option prices, and potential market manipulation after the introduction of closing auctions for equity cash market prices on August 3.
The regulatory body decided to review the entire methodology based on user feedback.
Europe
Bank of England's Stance on InflationPolicy Signal
Chief Economist Huw Pill argued that prompt interest rate hikes could reduce the need for aggressive long-term responses.
He emphasized that early action could preempt 'second-round effects' of inflation, such as rising wages and inflation expectations.
Pill rejected 'fine-tuning' rates amidst energy price uncertainty, calling for clear and decisive policy signals.
ECB Nears End of Rate Hike Cycle15-Year Shortest
The European Central Bank is expected to conclude its shortest rate hike cycle in 15 years with a potential September increase.
A Reuters poll indicates most economists anticipate the upcoming hike to be the second and final one.
Prevailing sentiment suggests that rising energy prices are unlikely to translate into broad inflationary pressures.
Riksbank Sees Growth Potential Amid InflationInflation Unclear
Sweden's Riksbank stated that inflation risks are not clear, suggesting potential for economic growth.
Summer inflation was higher than June forecasts, but the impact of supply shocks on consumer prices remains uncertain.
Governor Erik Thedeen noted no broad, sustained signs of rising inflation so far, while maintaining high vigilance.
European Bonds Rebound on Falling Gas PricesYields Recede
UK and Eurozone bonds rebounded as natural gas prices fell, easing energy inflation concerns.
UK 20-year and 30-year gilt yields returned to last week's levels after hitting 1998 highs, though short-to-medium term yields remained elevated.
Germany's 10-year Bund yield, after six days of weakness, also rebounded from near a 15-year high.
EU Revises Antitrust Rules for Sustainable PracticesSustainability Focus
The EU Competition Commission introduced new exceptions for dominant firms based on sustainable business practices.
Competition law guidelines were amended to allow justification of anti-competitive actions by firms with over 40% market share if they promote sustainability.
This revision offers more leeway for competition restrictions than previous rules, focusing on resource savings, pollution reduction, and increased recycling.
Ireland's Corporate Tax Revenue Surges+33% YoY
Ireland's corporate tax revenue in August surged to €2.8 billion, a 33% increase from €2.1 billion last year.
The majority of this increase came from a few large US multinational corporations.
Year-to-date tax revenue, excluding a historical Apple tax payment, exceeded previous year's by 6.2% or €3.9 billion.
Germany's fifth floating LNG terminal in Stade is set to begin operations in November, with the Energos Force FSRU arriving in September.
This is part of Germany's strategy to diversify energy sources after Russian pipeline gas cuts in 2022.
The terminal is expected to receive its first commissioning cargo in November.
UK New Car Registrations Up, BEVs Lead+17.5% YoY
New car registrations in the UK rose by 17.5% year-over-year in August, according to NewAutomotive data.
Battery Electric Vehicles (BEVs) became the largest fuel type in the UK market for the month.
German Authorities Investigate Defense Firm ArsonInfrastructure Attacks
German authorities are investigating a suspected arson attack outside a Munich defense company.
This incident follows a series of infrastructure disruptions, including a drone attack at an airport last month, with Berlin pointing to Russia.
Previous incidents include a DHL parcel fire in July 2024 at Leipzig Airport, which later expanded to logistics centers in the UK and Poland, eventually attributed to hidden Russian incendiary devices.
Volkswagen's supervisory board unanimously approved a 'Future Plan' that includes a potential reduction of 50,000 jobs, including management positions.
The plan aims to enhance competitiveness and prepare the company for the future.
It seeks to improve efficiency, competitiveness, and future positioning across the Volkswagen Group and its brands.
Broadcom (AVGO)-2.74%
Reported Q3 revenue of $29.59 billion and adjusted EPS of $3.32, both exceeding estimates.
Issued Q4 revenue guidance of $34.8 billion, which fell below market consensus, leading to a pre-market decline.
Raised FY2026 AI revenue guidance to $58 billion and reaffirmed FY2028 EPS target above $30, despite near-term Q4 gross margin pressure.
Nvidia (NVDA)+1.80%
Announced the acquisition of Hugging Face for $12.93 billion, aiming to strengthen its open-source AI ecosystem.
The deal includes up to $1 billion in stock compensation for employee retention, with closing targeted for H1 2027 pending regulatory approval.
Plans to launch RTX Spark AI PCs in October, with Lenovo and Acer as initial manufacturers.
Apple (AAPL)+1.00%
Reports indicate CEO Tim Cook will transition to Chairman, with John Turnus succeeding him as the new CEO.
Faces a £2 billion ($2.7 billion) class-action lawsuit in the UK over its App Tracking Transparency policy.
Alphabet (GOOGL)+1.59%
A court rejected the Department of Justice's demand to split the company in an antitrust ruling, easing some regulatory uncertainty.
Released Gemini 3.8 and launched Fairwind, a cyber defense program for governments and institutions.
EU antitrust authorities are investigating its AI search opt-out options for publishers.
Tesla (TSLA)+5.42%
Scheduled to unveil its two-seater autonomous robotaxi, 'Cybercab,' at an event in Texas on Thursday.
France has begun testing Tesla's Full Self-Driving (FSD) technology, with potential for approval by year-end.
Elon Musk views autonomous driving as central to the company's transformation, while investors see it as a strategy against Chinese competitors.
AbbVie (ABBV)-0.58%
Blood cancer drug entamig met key endpoints in its Phase 3 CERVINO trial, showing a 74% response rate versus 45.7% for the control group.
Completed the acquisition of Apogee Therapeutics, expecting short-term EPS dilution in 2026 and 2027, with accretion projected from 2032.
Reaffirmed its Q3 and full-year 2026 adjusted EPS guidance, signaling management confidence despite the acquisition.
Palantir Technologies (PLTR)+7.71%
Expanded its strategic cooperation with PwC to scale and market enterprise AI solutions.
NextEra Energy (NEE)+1.16%
Its merger agreement with Dominion Energy was approved by shareholders with over 670 million votes in favor.
Partnered with Santee Cooper to transition existing systems, including weather forecasting, to Google-based AI tools.
US power companies are increasingly adopting AI for business innovation amid surging electricity demand from data centers.
Williams Companies (WMB)-1.48%
Completed the acquisition of Momentum Midstream, expanding its asset base in oil and gas transportation and storage infrastructure.
Duke Energy (DUK)+0.70%
Its Florida subsidiary formally requested a rate reduction from regulators, set to take effect in January 2027.
T-Mobile (TMUS)+0.38%
Formalized its CFO succession plan, with Jessica Uhl appointed to succeed Peter Osvaldik from February 2027.
Reaffirmed its 2026 financial guidance and maintained its capital return policy, including dividends and share buybacks.
Microsoft (MSFT)N/A
Will reorganize its business units into Azure & Infrastructure and Devices & Consumer from FY27, with Azure revenue reported separately.
Provided FY27 Q1 Azure revenue growth guidance of 44-45% on a constant currency basis.
Palo Alto Networks (PANW)N/A
Reportedly acquiring AI startup Console for $500 million.
Meta Platforms (META)+3.01%
Reportedly attempting to narrow the technology gap with rivals by unveiling new AI models.
Launched a utility bill payment feature in WhatsApp in India, covering 22,722 billers for electricity, water, and insurance.
GE Vernova (GEV)+2.16%
Secured a contract with Ireland's ESB to supply 16 turbines for the 96-megawatt Cleanside wind farm in Scotland.
Also announced collaborations on a 1.2 GW nuclear power project in Sweden and a grid maintenance contract in Venezuela.
Boeing (BA)N/A
Confirmed it paid a $3.1 million fine to the FAA for safety violations related to the Alaska Airlines door plug incident.
Amazon (AMZN)+1.54%
Users reported service outages for Amazon Web Services (AWS) in the US.
Wells Fargo raised its target price for Amazon by $10 to $338.
Reports indicate Amazon aims to handle approximately 90% of its US delivery volume through its own logistics network.
Costco (COST)N/A
Reported August net sales of $23.7 billion, a 9.9% year-over-year increase.
Achieved an 8.4% comparable store sales growth across the company.
Walmart (WMT)+2.20%
Expanding its restaurant food delivery business on its platform through a partnership with Inspire Brands (owner of Dunkin' and Burger King).
Chevron (CVX)-0.22%
Signed new oil and gas business agreements in Ghana and Venezuela.
Several brokerages, including BMO, Wells Fargo, and Piper Sandler, raised their target prices for the stock.
ExxonMobil (XOM)-1.18%
Piper Sandler raised its target price for ExxonMobil from $158 to $185.
Reddit (RDDT)-1.33%
Expanded its MAX Campaigns, an automated ad campaign optimization tool, to all advertisers.
Goldman Sachs (GS)+3.34%
Dinesh was appointed Chief Technology Officer (CTO) of the Core Engineering division.
China
China Deploys Policy Financing for Emerging Firms¥460M First Tranche
The China Development Bank disbursed the first tranche of 460 million yuan (approx. $68.47 million) in policy-based financing for 2026.
These funds are allocated to three projects: batteries, high-grade nickel-chromium materials, and transportation infrastructure.
China Unveils 5-Year Plan for "Little Giants"Tech Self-Reliance
Ten central government agencies announced a five-year plan to support 'little giants' and emerging SMEs.
The initiative aims to promote technological self-reliance and job creation by involving these firms in national science and technology projects and utilizing government funds for early-stage capital.
S&P Warns on China's Lenient Credit RatingsCredit Risk Accumulation
S&P Global Ratings warned of accumulating credit risk in China's domestic financial market due to lenient local credit ratings.
The head of APAC ratings noted a concentration of top-tier ratings (AAA and above) for issuers in the local bond market.
Foreign firms, rated B (speculative grade) globally, are often upgraded to AAA for local Panda bond issuance, funneling credit risk into the domestic system.
Japan
Yen Surges on BOJ Rate Hike Expectations+2% Jump
The Japanese yen surged over 2%, with the USD/JPY pair falling from 158.96 to 156.17, nearing July highs.
Markets are pricing in a 75% probability of a 25 basis point rate hike by the Bank of Japan in September.
Official yen buying intervention by the BOJ on September 3 was not confirmed by BOJ account data.
Japan's FX Chief Mimura Cautious on Yen MovesOn Alert
Japan's Vice Minister of Finance for International Affairs, Mimura, stated he remains 'not reassured' by recent yen movements.
He emphasized continuous monitoring of currency market trends.
Mimura maintained a cautious stance, refraining from disclosing specific exchange rate or policy positions.
Latin America
Latin American Stocks Hit Multi-Month HighsMSCI LatAm +0.6%
The MSCI Latin America index rose 0.6%, maintaining near a four-month high.
The Brazilian Bovespa index gained 0.7%, extending its winning streak to 12 consecutive trading sessions.
The rally was supported by rising oil prices and a weakening dollar.
Chile Central Bank Expected to Hold Rate at 4.5%Next Week
The Central Bank of Chile is projected to maintain its benchmark interest rate at 4.5% next week.
This forecast is based on a Reuters poll of central bank traders.
Consumer prices accelerated in August by 0.3% and are expected to rise by 0.6% in September, with a 12-month forecast of 3.3%.
Brazil and ECB Explore Pix Cross-Border Payments2028 Pilot
Brazil and the European Central Bank are exploring linking their instant payment systems, Pix and a potential ECB equivalent.
A pilot project could launch as early as 2028, marking the first major cross-border trial for Pix.
LatAm Currencies Expected to Maintain GainsCarry Trade Support
JPMorgan expects high-yielding Latin American currencies, including the Colombian peso, Brazilian real, and Mexican peso, to continue benefiting from carry trade support.
The weakening dollar, following US Treasury market support measures last month, has enhanced carry trade profitability.
However, recent currency strength does not necessarily reflect underlying economic improvements.
Colombia Deregulates Mining and Oil Exploration10 Decrees Repealed
Colombia's new right-wing government, under President Abelardo De La Espriella, repealed 10 executive decrees restricting mining and oil exploration.
This move is part of an economic stimulus package, overturning regulations from the previous left-wing administration that limited resource exploration and extraction.
Additional executive decrees are planned to streamline procedures and further boost the economy.
Chile's Central Bank to Hold Key Rate for Two Years4.5% Rate
Chile's central bank is expected to maintain its benchmark interest rate at 4.5% at its September 8 policy meeting.
Traders surveyed by Reuters anticipate the rate to remain frozen at this level for 24 months.
Consumer prices accelerated by 0.3% in August and are projected to rise by 0.6% in September, with a 12-month forecast of 3.3%.
Top Gainers
Detail
Robinhood Markets (HOOD)
Financial sector stock led daily gains in the S&P500.