US STOCKS-Wall St to open lower as oil spikes after Trump rejects Iran peace proposal

By Reuters News

By Johann M Cherian and Tharuniyaa Lakshmi

- Wall Street was set to open lower on Monday after President Donald Trump rejected an Iranian proposal to end the conflict, leading to a spike in crude prices that rekindled inflation concerns and drove Treasury yields higher.

Offsetting broader market gloom was Nvidia's NVDA.O nearly 2% rise after the chip giant announced a $150 bln share repurchase authorization, making it the chip giant's biggest ever increase in share buybacks on record.

Iran announced a peace proposal at last week's United Nations General Assembly in New York, saying it had been relayed to the United States through Qatari mediators. While Trump said on Saturday he had rejected the offer, he told Axios on Sunday that he expected US negotiators to continue talks this week.

Crude prices jumped 2% to around $107-a-barrel. The 60-day rolling correlation between oil prices and Wall Street futures has climbed to its highest level since late May, LSEG data showed, suggesting that energy markets and equities are becoming more sensitive to the same macro factors, including the potential economic and inflationary impact of a prolonged conflict.

Those concerns also weighed on Treasuries, sending longer-dated yields to fresh multi-decade highs.

US-listed shares of precious metal miners were among top decliners as elevated yields weighed on prices of the non-yielding assets. Gold Fields slid 13.3% in premarket trading, while Harmony Gold and Endeavour Silver lost 6% and 5%, respectively.

"We are in a one factor world right now with oil prices impacting rates and rates being the main driver of all asset classes," Mohit Kumar, an economist at Jefferies said.

At 08:40 a.m. ET, Dow E-minis were down 293 points, or 0.56%, and S&P 500 E-minis were down 29.5 points, or 0.38%. Nasdaq 100 E-minis were down 193.75 points, or 0.63%.

Investors got some relief on the trade front following the conclusion of the Sino-US summit last week where the trade partners agreed to cut tariffs imposed on $60 billion worth of goods imported from each other. The countries also agreed to a two-month extension of their trade truce through to January 10.

As the week progresses, the spotlight will be on a slew of crucial economic indicators at a time when traders are pricing in a 68% chance that the Federal Reserve will hike interest rates by at least 25 basis points back-to-back in October, the CME Group's FedWatch Tool showed.

However, Thomas Hayes, chairman at Great Hill Capital said he was not in favor of a rate hike in October.

"Any historical instance of the Fed hiking into a short-term supply shock has always ended poorly. And the Fed is being impatient. They shouldn't have hiked in September. They could potentially make the same mistake in October," he said.

The Personal Consumption Expenditures Index for August and the Non-Farm Payrolls report for September, both due this week, could help investors gauge the path for monetary policy by the Fed this year.

Policymakers Michelle Bowman, Lisa Cook and Thomas Barkin are due to speak later on Monday and could reiterate the hawkish shift in policy at the central bank since the previous meeting.

Tesla TSLA.O dipped 0.5% after brokerage J.P.Morgan lowered its price target on the stock, citing weak deliveries in the third quarter.

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