Markets Overview

  • ASX SPI 200 futures down 0.5% to 8,736.00
  • S&P 500 up 0.8% to 7,398.93
  • Dow Average little changed at 49,609.16
  • Aussie up 0.2% to 0.7223 per US$
  • US 10-year yield fell 3.1bps to 4.3541%
  • Australia 3-year bond yield rose 5.5 bps to 4.66%
  • Australia 10-year bond yield rose 6.6 bps to 4.99%
  • Gold spot up 0.6% to $4,715.25
  • Brent futures up 1.2% to $101.29/bbl

Economic Events

Australia’s upcoming budget will take aim at soaring home prices and seek to make it easier for people to gain a foothold in the housing market, Treasurer Jim Chalmers said.

US equity-index futures edged lower and the dollar rose against most major peers after President Donald Trump rejected Iran’s response to his latest proposal to end the war, prolonging the effective closure of the Strait of Hormuz. Oil climbed.

Contracts for the S&P 500 Index fell 0.2% after the underlying index rallied to a record on Friday. The dollar climbed against major peers, with the pound among the laggards as UK Prime Minister Keir Starmer came under pressure to step aside after poor local election results.

Brent crude jumped 3.1% to above $104 a barrel, recovering some of last week’s losses as the continued closure of the strait curbed the transit of oil and gas from the Middle East. Gold declined.

The mutual rejection of peace proposals weighed on risk sentiment after global equities had rallied to record highs on expectations the US-Israel conflict with Iran would ease. Crude oil has retreated from peaks above $125 a barrel as traders price in an eventual de-escalation, though the path remains uneven, with headline risk likely to drive bouts of volatility.

“Trump’s rejection of Iran’s latest peace plan sees the week beginning in a ‘risk-off’ mode, reversing some of the price action we saw last week,” said Jason Wong, a strategist at Bank of New Zealand. “This can extend in early trading.”

Iran offered to transfer some of its stockpile of highly enriched uranium to a third country in its response to an earlier US proposal to end 10 weeks of war, but rejected the idea of dismantling its nuclear facilities, the Wall Street Journal reported. Iran disputed the report, according to its semi-official news agency Tasnim. Trump called the Iranian response “TOTALLY UNACCEPTABLE”.

Across markets, the success of the momentum strategy — piling into recent winners, effectively — has become a defining feature. Junk bonds and crypto have been drawn in, and one momentum index in equities closed Friday near the highest since the global financial crisis.

Barclays Plc strategists say the trade has reached extremes that historically foreshadowed selloffs. At Goldman Sachs Group Inc., the trading desk wrote last week that valuations for high-momentum stocks are stretched and positioning is among the highest in recent years, based on prime brokerage data.

Beyond the war, traders have a lot to parse this week with the scheduled meeting between Trump and Chinese President Xi Jinping and US inflation data, which will offer clues on where interest rates are headed.

“Traders may have been looking for at least an interim agreement ahead of Trump’s visit to Beijing but now it seems we are faced with another round of oil price gains,” said Sean Callow, a senior analyst at ITC Markets in Sydney.

In currencies, the pound weakened ahead of a speech by UK Prime Minister Starmer to forestall an immediate challenge to his job. Starmer will lay out a plan to turn the governing party’s fortunes around, including a commitment to take the UK closer to the European Union a decade after the Brexit vote.

“The pressure on Starmer to resign has increased,” Elias Haddad, global head of markets strategy at Brown Brothers Harriman, wrote in a note to clients. “Regardless, the risk the Labour government pivots further leftwards has diminished, which is supportive of GBP and gilts.”

Meanwhile, fresh data on consumer prices in the coming week is likely to affirm inflation remains a threat in the US. Economists see a sharp 0.6% increase in the consumer price index for April, based on the Bloomberg survey median estimate. That’s after March’s biggest monthly advance since 2022. The Bureau of Labor Statistics’ report is due Tuesday.

In Friday’s report, April’s nonfarm payrolls rose 115,000 after an even bigger surge in March, marking the strongest two-month increase since 2024, according to Bureau of Labor Statistics data out Friday. The unemployment rate was unchanged at 4.3%.

Still, the Federal Reserve is viewed as likely to remain on hold for now to allow the oil price spike to play itself out. Money market pricing continued to suggest the Fed will keep rates steady this year.

“What traders do need to see is last week’s themes continuing to flow into the new week, and it feels like that dynamic remains unchanged,” wrote Chris Weston, head of research at Pepperstone Group.