A look at the day ahead in European and global markets from Stella Qiu
U.S. President Donald Trump surprised markets by announcing late on Monday that Israel and Iran had agreed to a complete ceasefire, potentially ending a 12-day conflict. In his own words, the ceasefire would last “forever”.
Investors are surely hoping it is real and will hold. It was only days ago that the U.S. launched strikes on Iran that risked drawing it into another costly foreign war.
Oil prices duly slumped almost 3% on Tuesday, on top of an almost 9% tumble overnight as the immediate threat to the vital Strait of Hormuz shipping lane appeared to have lessened.
U.S. crude futures are back at $66.80 per barrel, about the lowest since June 11 before Israel’s attacks on Iran began. That is a relief for global inflation, which will make central bank efforts to tame inflation a little easier.
But the situation is still very fluid.
Missiles were still being launched from Iran towards Israel. Israeli media said a building had been struck and three people were killed in the missile strike on Beersheba.
An Iranian official earlier confirmed that Tehran had agreed to a ceasefire, but the country’s foreign minister said there would be no cessation of hostilities unless Israel stopped its attacks.
Risk assets rallied nonetheless – S&P 500 futures rose 0.5% and Nasdaq futures were 0.7% higher. European stock markets are bracing for a strong rebound, with EUROSTOXX 50 futures up 1.2%.
The MSCI’s broadest index of Asia-Pacific shares outside Japan gained 2.1% while Japan’s Nikkei rallied 1.1%. South Korean shares hit their highest since September 2021.
The beleaguered dollar, which had found some safe-haven bids from the Middle East conflict, was on the back foot again and fell 0.5% to 145.45 yen, having come off a six-week top of 148 yen overnight. [FRX/]
With the Israel-Iran conflict potentially easing, investor focus shifts to Federal Reserve Chair Jerome Powell’s upcoming appearance before Congress. The Fed has not made a move on interest rates this year due to the inflationary impact of Trump’s tariffs.
But some Fed officials are breaking ranks with Powell, whose hawkish view on rates has drawn Trump’s ire. Fed’s Michelle Bowman said overnight that she was open to cutting rates in July, while Governor Christopher Waller said he would also consider a rate cut next month.
More Fed officials will be speaking tonight, with New York Fed President John Williams giving keynote remarks in New York and Cleveland Fed President Beth Hammack due to speak on monetary policy in London.
In Europe, central bankers are busy too. Bank of England Governor Andrew Bailey will make public appearances in London and a few ECB officials will be giving speeches.
Key developments that could influence markets on Tuesday:
— Fed Chair Jerome Powell appears before Congress, along with public appearances by other Fed officials including New York Fed President John Williams, Cleveland Fed President Beth Hammack and Boston Fed President Susan Collins.
— NATO annual summit begins in the Hague
— Bank of England Governor Andrew Bailey and chief economist Huw Pill appear at a conference on Britain’s return to the gold standard in 1925.
— Germany IFO business survey
— U.S. Conference Board consumer confidence
— Canadian CPI for May
(Editing by Jacqueline Wong)
Comments