Policy makers from countries accounting for two-fifths of global economy set rates this week.
| Market Snapshot | ||
|---|---|---|
| Brent Crude | 73.81 | -0.57% |
| S&P 500 Futures | 6,060 | +0.47% |
| US 10-Year Treasury Yield | 4.424% | +0.026 |
| Gold | 3,417.15 | -0.44% |
| Bloomberg Dollar Spot Index | 1,200.65 | -0.15% |
Market data as of 06:35 am EST. Market data may be delayed depending on provider agreements.
Five things you need to know
- Crude prices erased an early surge as traders speculated the hostilities between Israel and Iran won’t ignite a wider conflict in the region. Brent was trading near $74 a barrel after giving up a 5.5% increase.
- President Donald Trump said it’s possible Israel and Iran could reach an agreement to end their conflict, though the two sides may need to “fight it out,” before they’re ready to broker a peace deal. Trump is in Canada for a Group of Seven summit of world leaders.
- Kering shares surged as the owner of the Gucci fashion house prepared to name the chief executive officer of Renault as its next CEO. Luca de Meo will be appointed to the job in the coming days, said people familiar with the matter. Renault shares fell as much as 8%.
- China posted 6.4% growth in retail sales in May, beating all estimates and notching the fastest pace since 2023. Still, a deepening housing market slump and deflationary forces suggest the consumer boom will prove temporary.
- Abu Dhabi National Oil made an $18.7 billion offer for Australian fossil fuel producer Santos. It’s one of the most audacious overseas moves yet by the Middle Eastern company seeking to expand production of liquefied natural gas.
Central bank action
Nations accounting for two-fifths of the global economy set interest rates this week, which may shift investors’ focus from the Middle East conflict.
The US, UK, Switzerland and Japan are among those jostling for attention, while peers in Brazil, Chile, Indonesia, Turkey and Sweden also meet.
Most, with the exception of Switzerland and Sweden, are set to keep rates on hold as officials await stronger insights into the path of inflation and just what effect the trade war will have on economic growth. The Israel-Iran conflict is now also clouding the outlook.
Here’s a rundown of the big meetings and the role markets will play in the decision-making:
The Federal Reserve: Chair Jerome Powell and colleagues meet on Wednesday. Even with rates set to stay unchanged, traders will scrutinize economic and interest-rate projections as well as Powell’s comments. Markets ended last week betting the central bank won’t lower borrowing costs until September at the earliest.
The Bank of Japan: A surge in Japanese bond yields is impacting debt markets elsewhere — as a Bloomberg analysis details here — a reversal from just a few years ago when the No. 3 economy was an anchor on global borrowing costs. Following the recent market turmoil, the BOJ is likely to consider slowing its pullback from the market after its holdings of Japanese government bonds fell ¥6.18 trillion ($43 billion) in the first quarter, the biggest-ever drop according to data going back to 1996. An announcement on this may come on Tuesday even if rates are left alone.
The Bank of England: Policymakers meet on Thursday under pressure to lower rates, but not expected to do so quite yet. A recent run of woeful data means market bets show the odds of a summer rate cut doubling this month, with two reductions by the end of the year now almost fully priced in.
Swiss National Bank: Officials will reduce borrowing costs by a quarter point on Thursday, according to a Bloomberg survey of economists. That would return the benchmark to the level it last crossed in September 2022, when seven years of negative rates ended. Policymakers are acting to stem a rise in the franc, which has gained more than 8% against the dollar since early April. —Craig Stirling and Simon Kennedy
On the move
- US Steel rises as much as 5% in early trading. Trump approved Nippon Steel’s $14.1 billion purchase of the company after giving significant concessions to the US government, including a “golden share” that allows Washington a say in major decisions.
- EchoStar soars 49% after Trump urged the company and the chairman of the Federal Communications Commission to resolve a dispute over the company’s valuable spectrum licenses.
- Sarepta Therapeutics tumbles 30%. The company said a second patient has died of acute liver failure after being treated with its gene therapy for a rare muscle disorder.
- Victoria’s Secret rises 2.8%. Barington Capital Group has built a stake in the lingerie retailer and plans to urge it to make changes to its board and strategy, according to a person familiar with the matter.
- With hostilities between Israel and Iran entering a fourth day, watch energy names Exxon Mobil, Chevron, ConocoPhillips and Occidental Petroleum, as well as defense stocks Lockheed Martin, Northrop Grumman, RTX, General Dynamics and airlines including Delta Air Lines, United Airlines, American Airlines. —Subrat Patnaik
Week ahead
Outside of the Middle East, policymaking takes the top spot this week with world leaders meeting, US lawmakers discussing tax cuts and a series of central bank meetings taking place from Japan to the US.
Monday: Group of Seven leaders continue talks in Canada, US Empire manufacturing data.
Tuesday: US senators debate a $3 trillion House tax bill. The Bank of Japan and Chile’s central bank both set interest rates. Germany’s ZEW survey. G-7 leaders complete their talks in Canada
Wednesday: The US, Brazil and Indonesia set rates. The euro-area and UK consumer price indexes are released as are US housing starts and initial jobless claims. Euro-area and Canadian central bankers speak in various locations.
Thursday: Norway, Switzerland, Turkey, the UK and Taiwan set rates. The US has a federal holiday. The US’s 75-day TikTok divest-or-band deadline is today.
Friday: China sets loan prime rates, Japanese CPI is released and the US sees the Conference Board leading index and Philadelphia Fed’s services data.
Oil options
Even with oil prices starting to retreat, some parts of the market are still reflecting jitters.
In options, several thousand lots of August calls with strike prices of more than $80 a barrel — which profit when prices rise — changed hands in the first few hours of Monday’s session. About 2,000 lots each of August Brent calls, with strikes of $100 and $101, also traded in a flurry of activity not normally seen during Asia hours.
Options don’t typically trade to this extent during the Asian portion of the day. It wasn’t immediately clear whether the options activity was part of a wider strategy.
The big fear in the market is still centered on the Strait of Hormuz, the narrow waterway through which Middle East producers ship about a fifth of the world’s output daily. Prices could soar if Tehran attempts to block the route.
For now, traders are betting Iran won’t take that step. Robert Rennie, head of commodity and carbon research at Westpac Banking, called the early jump an “over-reaction.” He sees Brent prices capped below $80. —Yongchang Chin
Word from Wall Street
“This has been a year where fading bad news paid off, and the FOMO theme has been growing louder.”
Max Gokhman
Deputy chief investment officer at Franklin Templeton Investment Solutions.
Check out the full story on why traders are opting to hold their breath rather than sell.
One number to start your day
- 20%The S&P 500 risks sinking 20% in one worst-case scenario modeled by RBC that would involve inflation spiking and higher oil prices.
Read the full article HERE.
