MARKET WRAPS

Watch For:

Germany provisional CPI; no major corporate trading updates expected

Opening Call:

European stock futures traded mostly lower early Monday. Asian stock benchmarks were weaker; the dollar fell; Treasury yields were flat; while oil futures rose and gold fell.

Equities:

Stock futures point to a lower open in Europe, after U.S. forces attacked two Iranian rocket launchers in the Strait of Hormuz.

The attacks were "a fresh reminder that this conflict still has plenty of dry tinder lying around," said Stephen Innes, managing partner at SPI Asset Management.

"The timing could hardly be worse for markets," he continued. "Oil does not need to return to crisis levels to matter here. It merely needs to remain expensive enough to prevent inflation from behaving as neatly as the Fed would like, because every extra dollar in crude now lands on a market that has suddenly rediscovered the possibility of another rate hike."

Forex:

The dollar could strengthen on growing prospects of Federal Reserve rate increases, which typically increase the appeal of U.S. fixed-income assets.

Fed Chairman Kevin Warsh doubled down on the central bank's inflation-fighting mindset at the Jackson Hole economic policy symposium on Friday

Although Warsh's speech isn't a "pre-commitment to a September hike, it reinforced the Fed's inflation-fighting credibility and kept further tightening in play if inflation fails to ease meaningfully," two strategists at OCBC Group Research said.

Bonds:

Warsh delivered a speech that quieted some concerns about his inflation-fighting strategy, but set up a key test for next month. If the Fed raises interest rates, he risks infuriating the White House weeks before the midterm elections. If he holds, he could revive the doubts that Friday's speech quieted.

"The main theme was the hawkish repricing of Fed expectations following Warsh's speech," Commerzbank Research analysts said in a note.

Before Friday, the Fed's default was to hold unless the data made a case to move. Warsh's speech reversed that presumption, said Donald Kohn, a former Fed vice chairman. "He's changed the presumption to they'll raise rates unless the data suggests it's not necessary," said Kohn, whose reading was shared by others at the Kansas City Fed's annual symposium.

Energy:

Oil rises in early trade amid renewed fighting in the Middle East that could lead to supply disruptions.

"The path to a deal to reopen the Strait [of Hormuz] remains elusive," ANZ Research analysts said in a note.

"President Trump signaled he won't lift a naval blockade on Iranian ports, a key demand from the Islamic Republic. He's also not interested in returning to the terms of the June ceasefire," the ANZ analysts added.

Metals:

Gold declined in Asian trade. The precious metal's pullback below $4,600 is likely to be a natural correction on profit-taking after a strong rally, XS.com's Rania Gule said.

While the environment remains supportive for gold on a fundamental basis, the market has become increasingly sensitive to expectations surrounding U.S. monetary policy, she said.

"Elevated inflation, combined with continued uncertainty over economic growth, fiscal conditions, and bond markets, is making the Federal Reserve's task increasingly complicated," the analyst added. Copper is little changed. Strong fundamentals continue to provide support, while growing expectations for higher U.S. interest rates cap room for prices to rise, Guangzhou Futures analysts said. Copper's fundamentals remain solid as supply stays tight and inventories continue to decline, they said. Iron ore rose in early Asian trading. The commodity's supply and demand dynamics have improved, Nanhua Futures analysts said. Investors expect demand to recover due to seasonal factors, they added.

TODAY'S TOP HEADLINES

Fighting Flares in Middle East After U.S. Strike on Iranian Rocket Launchers

WASHINGTON-U.S. forces attacked two Iranian rocket launchers in the Strait of Hormuz on Sunday, the U.S. Central Command said, marking the first American strike in weeks and heightening the risk of a return to all-out conflict in a region already battered by war.

The command said that the Iranian launchers, which were deployed on Larak Island, were preparing to fire rockets filled with sea mines into the strait when they were struck.

The Sudden Unraveling of Wall Street's Momentum Trade

Wall Street's hottest trade has gone ice cold.

For years, it paid off to buy stocks that were rising in price-and bet against struggling shares. The momentum trade was especially profitable this year, as investors piled into hot stocks including Micron Technology, Nvidia, Advanced Micro Devices and other artificial-intelligence darlings while wagering against those likely to be hurt by the embrace of AI.

Warsh Makes the Case for Higher Rates and Raises the Bar for Standing Pat

JACKSON HOLE, Wyo.-Fed Chairman Kevin Warsh put to rest some concerns about his inflation-fighting strategy but set up a potentially bigger test three weeks from now. If the Fed raises interest rates, he risks infuriating the White House weeks before the midterm elections. If he holds, he could revive the doubts that Friday's speech here quieted.

The central bankers gathered in the Tetons this weekend were unsure how much the Fed's new chairman would tell them about how he reads the economy. Warsh had been criticized after last month's meeting, including by several conference attendees, for not explaining how the Fed's current stance would bring inflation down.

The Geopolitical Mismatch Driving Russia to Threaten the West

Russia faces a fundamental asymmetry as it seeks to beat Ukraine into submission with intensifying airstrikes on shopping malls, power stations, ports and other infrastructure. Kyiv can rely on a secure hinterland beyond its borders-its European neighbors-for economic resilience and for military logistics.

The Kremlin, whose refineries, ports and defense industries are also under attack by Ukrainian missiles and drones, has no such backup. Hits to Russia's militarized economy translate more directly into damage to the country's ability to keep the war going.

The Summer That Scorched French Grapes, English Gardens-and Europe's Economy

BORDEAUX, France-For 700 years, Château Carbonnieux relied on rainwater to nourish its grapes, a tradition that preserved the vineyard's connection to the local terroir.

Then temperatures rose to a record-breaking 108 degrees Fahrenheit in June, and co-owner Philibert Perrin noticed the leaves of his Cabernet Sauvignon grapes turning yellow and shriveling, an ominous sign. So he did the unthinkable: He sent a tractor rigged with a water tank and hoses into the vineyard to hydrate his most vulnerable vines.

The World's Drinks Order Is In. Distillers Were Expecting More.

It's the corporate equivalent of ordering too much alcohol for a house party where half the guests turn out to be dry. Except with billions of dollars at stake and a no-returns policy.

Distillers' warehouses are crammed with barrels of aging spirits laid down in better times that fewer people want to drink these days. The problem doesn't only affect bourbon in the U.S. There is a global glut of cognac, Irish whiskey and Scotch whisky too. Investors tempted by alcohol companies' low stock-market valuations should look at their saturated balance sheets first.

Write to singaporeeditors@dowjones.com

Expected Major Events for Monday 05:00/FIN: Jul Retail sales

06:00/DEN: Jul Unemployment

06:00/NOR: 2Q Credit Indicator C3

06:30/HUN: Jul PPI

07:00/TUR: Jul Employment / Unemployment

07:00/TUR: 2Q GDP

08:00/GER: Aug North Rhine Westphalia CPI

08:00/GER: Aug Saxony CPI

08:00/GER: Aug Hesse CPI

08:00/GER: Aug Baden-Wuerttemberg CPI

08:00/ICE: 2Q GDP

08:00/GER: Aug Bavaria CPI

08:00/GER: Aug Brandenburg CPI

08:00/POL: 2Q GDP

09:00/MLT: Jul PPI

09:00/BEL: 2Q Final GDP

09:00/CYP: Jul PPI

09:00/GRE: Jun Turnover Index in Retail Trade

09:00/LUX: Jul PPI

09:00/GRE: Jul Labour Force Survey

09:30/BEL: Jul PPI

10:00/POR: 2Q GDP

12:00/GER: Aug Provisional CPI

16:59/SPN: Jun Monthly Balance of Payments

23:01/UK: Aug Shop Price Monitor

23:01/UK: Aug CBI Growth Indicator Survey

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