GEOPOLITICS – Strait of Hormuz / Iran
- The conflict between the United States and Iran remains the main driver of markets. On Saturday, Trump announced that an agreement on reopening the Strait of Hormuz was “largely negotiated” and would be made public soon. However, on Sunday, he reversed his position, stating there was no urgency and the naval blockade would remain until the agreement is signed and ratified.
- Secretary of State Rubio confirmed a “substantial proposal” regarding the strait’s reopening was on the table, emphasizing diplomatic efforts before considering other options. An indication of partial reopening was the departure of two tankers to Pakistan and China, and an oil tanker carrying Iraqi oil to China, which left the Gulf after being blocked for nearly three months.
MACRO / CENTRAL BANKS
- The new Fed president, Kevin Warsh, assumed office amid stagflation concerns. Markets anticipate a 25 basis point rate hike in January 2027, a significant shift from previous forecasts. Consumer confidence plummeted to historic lows in May amid rising fuel prices.
- Lagarde hinted at revising ECB inflation forecasts before the June 11 meeting, with close attention to how the ECB adjusts its interest rate trajectory amidst the energy shock. NZIER recommends the RBNZ to hold rates at 2.25% this week but suggests likely increases in the coming quarters.
- PBOC set the USD/CNY reference rate at 6.8318, signaling support for the yuan’s appreciation. Singapore exceeded Q1 GDP growth forecasts, with the local MAS hinting at a stabilization of its interest rate policy.
MARKETS – OVERVIEW
- Risk appetite dominated the start of the week, with S&P 500 and Nasdaq futures up. Gold rose amidst a weak dollar. Dow Jones, S&P 500, and Nasdaq reached record levels on Friday.
- Note on market liquidity due to Memorial Day closures in the US and holidays in the UK, Hong Kong, and South Korea. Frankfurt and Paris exchanges observe Pentecost Monday, with Euronext and Xetra open.
ASIA
- Nikkei 225 and Taiex hit record highs due to oil price drop and progress in Iran negotiations. Australian, Chinese, and Indian markets saw gains. No major economic releases expected in Asia today.
CURRENCIES
- CHF, GBP, and AUD strongest; JPY, USD, and NZD weakest. EUR/USD and GBP/USD up, USD/JPY stable. NOK and CHF strengthen, while JPY and TRY face pressure.
- USDIDX down 0.30% to 98.93.
COMMODITIES
- Oil prices plummeted due to US-Iran talks progress. Gold and silver rose, while natural gas fell. Analysts warn of lingering supply chain disruptions even after the Strait of Hormuz reopens.
CRYPTOCURRENCIES
- Bitcoin up 1.68% to $77,215, reflecting market sentiment. Volatility expected given the US-Iran negotiations.
TO WATCH TODAY
- News regarding US-Iran negotiations is crucial, impacting oil and dollar markets. Limited liquidity due to holiday closures could amplify market reactions to any Trump or Rubio announcements. Full trading resumes on Tuesday.
