Markets Overview
- ASX SPI 200 futures down 1.1% to 8,824.00
- S&P 500 up 1.7% to 7,554.29
- Dow Average up 0.9% to 51,671.03
- Aussie up 0.3% to 0.7070 per US$
- US 10-year yield little changed at 4.4710%
- Australia 3-year bond yield rose 0.7 bps to 4.43%
- Australia 10-year bond yield fell 0.5 bps to 4.81%
- Gold spot up 2.1% to $4,308.88
- Brent futures down 4.4% to $83.46/bbl
Economic Events
- 14:30: (AU) June RBA Cash Rate Target, est. 4.35%, prior 4.35%
Oil held losses after tumbling the most in more than two weeks on Monday as the US and Iran agreed to reopen the Strait of Hormuz, easing concerns over energy supplies and fueling a global equity rally. Stocks in Asia were set for a mixed open.
US crude was steady in early trading at around $81 a barrel, helping to ease inflation concerns. Futures signaled declines for equity benchmarks in Sydney and Hong Kong, while Tokyo is set to advance as traders look to a central bank decision later Tuesday. US contracts were little changed after the S&P 500 added 1.7% and the tech-heavy Nasdaq 100 rallied 3.1%.
President Donald Trump and Vice President JD Vance signed an electronic copy of a memorandum of understanding with Iran, a senior US official said in a call with reporters. Hormuz “is already partially opened,” and “it’ll be completely opened” Friday, Trump said during a meeting with French President Emmanuel Macron.
“The agreement between the US and Iran is a major breakthrough and a positive for markets as the back and forth in the negotiations has only caused additional uncertainty and volatility,” said Michael Landsberg at Landsberg Bennett Private Wealth Management.
While the nature of the deal could bring about further breakdowns between the sides — especially surrounding the major sticking point of removing Iran’s nuclear material — the reopening of the Strait will help push oil prices down, he added.
“Volatility may persist in the near term as markets assess the implementation and durability of the deal, but we maintain our view that resilient growth and robust earnings should continue to drive stocks higher,” said Ulrike Hoffmann-Burchardi at UBS Chief Investment Office.
US stocks could get an additional boost from a rotation into economically sensitive sectors that have lagged during the war, according to Morgan Stanley strategists led by Michael Wilson. JPMorgan Chase & Co.’s Mislav Matejka said the move into cyclicals is “on track to remain a winning strategy” through year-end, provided geopolitical tensions ease and earnings and inflation remain stable.
“We believe easing geopolitical tensions could help alleviate inflation pressures and help reduce bond yields, potentially driving a rotation into cyclical sectors and previously lagging areas of the market,” said Angelo Kourkafas at Edward Jones.
In Asia, the yen edged lower on Monday ahead of the Bank of Japan meeting, with policy makers widely expected to raise the benchmark rate to the highest level since 1995. Meanwhile, the Bank of Australia is set to hold rates steady after hikes earlier in the year.
With the drop in oil, swap traders have priced in lower chances of a US rate hike by December. The Fed is due to announce its next policy decision Wednesday, with economists expecting the central bank to keep its benchmark rate in a range of 3.5% to 3.75% as it waits to see how the war’s energy-price shock ripples through the economy.
