Weekly Espresso

The infoshot to help kick-start your week   Coming up this week: Fed minutes – Wednesday  Friday’s Bureau of Labor Statistics (BLS) report showed the US only added 29,000 jobs in […]

The latest US-China summit went as expected with pageantry being prioritised over policies. The trade truce between the two nations was extended by two months and they agreed to establish a “communication channel” to report AI incidents before their next meeting in November.

While all the major AI moguls dined in the White House, markets reacted positively to the lack of guardrails around AI development despite a batch of new stories containing more examples of agents going off script and hacking government institutions, like the Australian healthcare database. The leading US tech index is now up 2.45% since former Anthropic researcher Jacob Coxon’s tweets on the existential threat from superintelligent AI went viral three weeks ago.

Taiwan, the soon-to-be-expiring trade truce and the global energy crisis might have to take a backseat to AI when Trump and Xi meet this week in Washington.

After a week of nonstop press coverage that has seen the existential threat from superintelligent AI enter the mainstream discourse, investors will be watching out for any agreements that allow for a mutual ‘slowdown’. On Sunday, Treasury Secretary Scott Bessent said a new AI safety notification mechanism has been proposed for the two leaders to consider during the summit. While it looks unlikely either Trump or Xi will be willing to put further guardrails in place, according to leaks this weekend, some senior officials in the Trump administration are frustrated about his refusal to take the subject seriously and will try to convince Trump to push for more oversight and international agreements with China…

Markets across the globe fell as the price of crude oil rose above the $100 mark for the first time since May. On Thursday, Saudi Arabia had to suspend operations through its East-West pipeline after a Houthi drone strike. Saudi oil traders have said they will run out of oil exports if the pipeline doesn’t reopen within days, hampering around 4% of the global oil supply. Yesterday, the Houthis also captured the island of Perim expanding their control of the Bab al-Mandab strait.

Supply pressures forced US retailer Costco to start limiting how much motor oil consumers can buy to 40 gallons per week…

Higher oil prices put fresh pressure on bond markets sending yields across the globe higher. 30-year UK gilt yields hit 5.80% their highest level since 1998 and their equivalent US government bond yields also reached their highest level since 2008. Japan’s 10-year yield hit 3% for the first time in thirty years, doubling the rate it was at when Sanae Takaichi became Prime Minister.

Yields did pull back later in the week as the rise in oil prices slowed. All the turmoil in bond markets doesn’t show much sign of slowing down…

Oil climbed above $90 a barrel over the bank holiday weekend, after the US targeted rocket launchers on Larek Island to stop the Iranians from deploying mines in the Strait of Hormuz. Economic sanctions had been the preferred approach of the US over the last month but there’s been little success at getting Iran back to the negotiating table. Iranian leaders appear prepared to drag talks out until at least after the US midterm elections in November.

Prior to the latest strikes, traffic through Hormuz had increased 30% week-on-week. Expect it to fall back again this week if tensions can’t be de-escalated…