Markets Overview
- ASX SPI 200 futures up 0.4% to 8,853.00
- S&P 500 up 0.5% to 7,431.46
- Dow Average up 0.7% to 51,202.26
- Aussie little changed at 0.7042 per US$
- US 10-year yield rose 1.9bps to 4.4789%
- Australia 3-year bond yield fell 7.3 bps to 4.42%
- Australia 10-year bond yield fell 8.3 bps to 4.81%
- Gold spot up 0.2% to $4,219.33
- Brent futures down 3.4% to $87.33/bbl
Economic Events
US equity futures climbed, oil slumped and the dollar fell after the US and Iran said they had reached a deal to reopen the Strait of Hormuz.
S&P 500 futures rose 0.7% in early Asian trading, while the dollar declined against its major peers. Brent crude fell more than 4% toward $83 a barrel, after closing last week at the lowest in more than three months. Bitcoin climbed more than 2%.
The Strait of Hormuz will be “opening” on Friday upon the signing of the deal with Iran, President Trump said in a post on Truth Social. The deal announcement came first from Pakistani Prime Minister Shehbaz Sharif, and was followed by Trump and Iranian state media. Neither side released the text of the deal but the broad contours had circulated for days.
“Markets have been waiting for this news for months, and the relief is already showing, with oil sliding and risk assets catching a bid,” said Josh Gilbert, lead analyst for Asia Pacific and the Middle East at eToro Ltd. “However, this is still a move of optimism, not certainty. The nerves won’t fully settle until the deal is signed, meaning investors should still err on the side of caution.”
The peace agreement paves the way for an end to a conflict that claimed thousands of lives, disrupted the global economy, and drove volatility across financial markets for more than three months. It may also provide an additional tailwind for global equities, which have continued to scale record highs despite the war, buoyed by relentless enthusiasm for artificial intelligence.
The sector was once again in focus on Monday. Anthropic PBC has disabled access to its most advanced artificial intelligence models, including Mythos, following an unprecedented order by the Trump administration to keep the technology out of the hands of all foreign nationals, the company said.
“In isolation it would have been a negative” for sentiment in Asia, said Tony Sycamore, an analyst at IG Markets in Sydney, “but probably overshadowed now by peace deal news, at least initially.”
The next major event risk looms on Wednesday, when the Federal Reserve votes on interest rates. Traders are also awaiting a swath of other central bank decisions this week as the energy-price shock from the Middle East war feeds into consumer prices and crimps growth.
In Asia, the Reserve Bank of Australia is expected to keep its policy rate unchanged at the end of its two-day meeting on Tuesday while the Bank of Japan may hike its rate to 1%, a level last seen in 1995. Bank Indonesia could lift rates again, according to a Bloomberg survey, after an out-of-cycle move last week to support its currency.
The Fed will be meeting for the first time under new Chair Kevin Warsh. If there’s a convincing message that the Fed is willing to shift back into inflation-fighting mode, Wall Street will likely be reassured about Warsh’s commitment to maintaining the bank’s political independence. The dot-plot will also be a gut check for investors betting on a rate hike later this year.
“A hawkish Fed hold should support the dollar, but Warsh risks spoiling the dollar bull party,” Elias Haddad, global head of markets strategy at Brown Brothers Harriman, wrote in a note to clients. Markets will focus on whether Warsh “joins the majority in keeping rates on hold or dissents for a cut, becoming the first Fed Chair in history to be outvoted on policy.”
