Oil Near $100. AI Still Has Buyers.

GOOD MORNING, U.S. markets are closed for Labor Day, but the setup for the shortened week is already getting harder to ignore. August payrolls came in far stronger than expected, oil is back near $100 as Gulf tensions flare, and rate-hike risk is rebuilding just before the week's inflation data. The counterweight is AI: chip stocks surged across Korea and Japan, showing investors are still willing to pay for growth even as the macro backdrop gets less forgiving.

MARKETS | TLDR

U.S. jobs came in much stronger than expected: Payrolls rose by 162,000 in August versus 56,000 expected in a Reuters poll, keeping a September Fed hike firmly in play.
Oil climbed to a six-week high: Brent settled at $97.31 as renewed U.S.-Iran clashes and tighter traffic through the Strait of Hormuz revived supply-shock fears.
AI chips powered Asia higher: South Korea's Kospi jumped 4.6%, with Samsung up 5.7% and SK Hynix up 8.1%, while Japan's Nikkei gained 2.1%.

Rates

The Jobs Report Just Raised the Bar for CPI

The U.S. labor market looked considerably stronger in August than investors expected. Nonfarm payrolls increased by 162,000, compared with 56,000 forecast in a Reuters poll, while unemployment held at 4.1%. July was also revised up to a 21,000 gain. The immediate market read-through was straightforward: short-term rate futures moved to price roughly a 59% chance of a Fed hike at the September 15–16 meeting, and the two-year Treasury yield rose to around 4.38%.

That matters because the market entered September hoping weaker growth could give the Fed room to tolerate still-elevated inflation. A stronger labor market weakens that argument. The Fed no longer needs to choose between protecting employment and leaning against price pressure quite as urgently; if inflation stays sticky, policymakers have more room to tighten. Higher front-end yields also raise the hurdle for expensive equities, especially long-duration growth and AI names whose valuations depend heavily on future cash flows.

The next test is Friday's CPI report. The jobs data strengthened the hike case, but it did not settle it. Reuters noted that wage growth remained moderate, limiting evidence of a fresh wage-price spiral, while the Fed is already in its pre-meeting communications blackout. In other words, inflation now carries more weight: a soft print could still rescue the pause case, but a hot one would land on a market that has just lost one of its strongest arguments against another hike.

AI Chips

AI Still Has Buyers — Even With Oil Near $100

The AI trade opened the week with a reminder that investors have not abandoned hardware. South Korea's Kospi surged 4.6%, Samsung Electronics gained about 5.7% and SK Hynix climbed more than 8%, while Japan's Nikkei rose roughly 2%. Emerging-market equities also pushed to multi-month highs as semiconductor shares led the move. U.S. cash markets were closed for Labor Day, leaving Asia as the clearest read on where investors still wanted risk.

The striking part is what the rally had to ignore. Brent crude was trading near $100, diesel prices were at record highs, and stronger U.S. payrolls had increased the chance of another Fed hike. Those are normally difficult conditions for long-duration growth assets. Yet investors still bought the part of the market most directly tied to AI infrastructure, suggesting that confidence in chip demand remains strong enough — for now — to offset a worsening rates backdrop.

There is an important caveat. South Korea's AI-heavy market has already shown how quickly enthusiasm can reverse when leverage and valuation collide. Reuters analysis noted that the Kospi fell 39% between June and July as leveraged tech positions unwound. Monday's rally therefore looks less like proof that macro risk no longer matters and more like evidence that investors still see enough earnings power in semiconductors to re-enter after a violent reset. The next question is whether that conviction survives another leg higher in oil and bond yields.

HEADLINES

Hormuz traffic is tightening again: Iran said it would announce a new restricted zone in the Gulf after another round of U.S.-Iran attacks; Kpler data showed commodity-vessel traffic through the strait at its lowest level since May, keeping the oil supply premium alive.
Europe is heading into another rate decision with oil rising: Economists polled by Reuters expect the ECB to raise its deposit rate by 25 basis points to 2.5% on Thursday, with energy-driven inflation complicating the case for an early end to tightening.
EverBank and WaFd are combining in a $3.9 billion deal: The reverse merger would create a regional bank with about $75 billion in assets and is projected to lift WaFd's 2027 EPS by roughly 29%, another sign that regional-bank consolidation remains active.
Novartis fell after a key cholesterol-drug setback: Shares dropped 3.2% after a closely watched study failed, a reminder that idiosyncratic healthcare risk can still overwhelm a relatively quiet macro session.
Papua LNG is being reshuffled before a final investment decision: Santos bought another 3.3% stake from TotalEnergies for $189 million while ExxonMobil increased its role, concentrating operatorship ahead of a planned fourth-quarter investment decision.

UPCOMING

Sep. 8 — New York Fed Survey of Consumer Expectations: Inflation expectations will matter more than usual with oil and diesel rising and the Fed's September decision still live.
Sep. 10 — U.S. PPI: Producer prices offer the first major inflation check of the week and could show whether higher energy costs are starting to broaden through the pipeline.
Sep. 10 — ECB rate decision: A 25-basis-point hike is widely expected; guidance will determine whether markets treat it as the end of the cycle or the start of a longer tightening phase.
Sep. 11 — U.S. CPI: This is the week's main event. After the strong jobs report, inflation is now the clearest remaining swing factor for the Fed's September 15–16 decision.

DEEP INSIGTHS

Asia's next leverage-driven market crash could be brewing

Why read: Reuters' Open Interest column uses South Korea's recent AI-led boom and 39% June-to-July collapse to examine how margin lending can turn a concentrated technology rally into forced selling. It is useful context for Monday's sharp rebound in Korean chip stocks — and for understanding why the next AI drawdown may be driven as much by market structure as by fundamentals.

AI computing demand may never be sated, says CEO of Nvidia partner Iren

Why read: The Financial Times looks at the capital intensity behind the AI infrastructure boom through Iren, a former crypto miner now building Nvidia-powered data centers. The piece adds useful context on the financing, power and balance-sheet requirements sitting underneath the semiconductor rally — exactly the layer investors need to watch as borrowing costs stay high.