Morning Bid: The dog days are over

A look at the day ‌ahead in European ​and global ​markets from Tom Westbrook

Europe enters autumn with benchmark gas prices at 3-1/2-year highs and stocks at their lowest ever for the time of year on records ‌stretching back to 2011.

Winter will be a gamble because a scramble for ⁠gas, with Qatar's supply disrupted by the Iran war, has deepened a "backwardation", where near-term prices are above those for ‌winter.

That means there's no economic ‌sense in stockpiling gas now, leaving Europe to hope the scorching summer isn't followed by a deep freeze.

Bond markets are coming back from the summer lull decidedly unimpressed, with bund ​futures trading at 15-year lows in Asia and OAT futures at their lowest since launching in 2012.

French and German yields hit 15-year tops on Monday with fiscal pressures mounting ⁠in both countries. European inflation data due later in the session is likely to cement market expectations for a European ​rate hike next week.

U.S. President Donald Trump threatened further strikes against Iran after the first exchange of fire in a month.

Yields were also on ​the rise through the Asia session with 10-year Treasury ‌yields hitting a 20-month high in Tokyo trade and Japan's 10-year benchmark touching 3% for the first time since 1996.

Stocks were down in Seoul, ⁠Tokyo, Sydney and Hong Kong, where shares in fashion giant Shein Global fell 8% in their first day of trading after an initial public offering that was already discounted on growth and regulatory challenges.

Some ⁠investors have noted that much of the rise in global bond yields is driven by real yields going ​up, or in other words better growth expectations — so maybe not such bad news for stocks after all.

But there's also a worrying rise in term premia. By one measure, published by the New York Fed, ‌the 10-year Treasury term premium had more than tripled from around 26 basis points in January 2025 to more than 80 bps in June.

Since ‌the end of June, nominal 10-year Treasury yields have risen about 36 basis points against a ⁠9 bp rise in breakeven inflation expectations, ‌suggesting some mixture of rises ​in term premium and real yield.

Key developments that could influence markets on Tuesday:

Economics: Euro zone CPI, US JOLTS, ISM Manufacturing

Earnings: Dell, Palo Alto Networks

(Editing by ‌Jamie Freed)

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