U.S. stock futures were higher in early European trade as investors cautiously return to risk at the start of a shortened trading week.
Oil prices nudged higher with Brent crude hovering above $72 a barrel. However, the benchmark remained below highs hit earlier in the session, after the U.S. and Iran agreed once again to halt further attacks and to resume peace talks. The two sides traded tit-for-tat strikes, raising the threat to shipping in the Strait of Hormuz. A U.S. official said vessels would now move freely, The Wall Street Journal reported.
U.S. equities were supported by the easing tensions, as the S&P 500 and Nasdaq indexes look to turn the tide on five-day losing streaks.
Looking ahead, a slew of jobs releases—culminating in non-farms payroll data for June published Thursday—will help define the week’s narrative. Investors will parse the data for clues on the Federal Reserve’s policy path, after the central bank’s last meeting boosted rate-hike expectations.
U.S. markets close Friday for the Independence Day holiday.
—Oil prices edged higher in early European trade, though the benchmarks continue to trade below the last session’s high after an exchange of fire between the U.S. and Iran raised escalation fears. Brent crude for August delivery rose 0.6% to $72.40 a barrel, while WTI contracts for September delivery gained 1% to $69.64 a barrel. “While commercial shipping is expected to resume ahead of renewed peace talks, traffic through Hormuz remains below normal levels,” MUFG’s Soojin Kim wrote in a note to clients. “Oil prices are likely to remain under downward pressure as geopolitical risk premium continue to unwind and regional supply recovers.”
—In the U.S., futures for the S&P 500 were up 0.6% while the Dow Jones Industrial Average increased 0.3%. Nasdaq futures rose 0.9% in early European trade.
Stocks linked to the build out of artificial-intelligence gain across the board premarket, with Nvidia gaining 1.2%.
—Asian stocks were mixed. South Korea’s Kospi narrowed losses to end 0.2% lower after a volatile trading day. SK Hynix and Samsung Electronics outlined a $1.3 trillion investment plan to boost memory production, with the pair falling 1.7% and 4.8%, respectively. Japan’s Nikkei Stock Average ended 0.15% higher, while Hong Kong’s Hang Seng Index rose 1.95%. China’s benchmark Shanghai Composite gained 1.2%.
—European indexes were mixed in muted early trade. Stocks across the technology sector gained, though weakness in banks and autos dragged indexes. The Stoxx Europe 600 was flat. France’s CAC 40 slipped 0.2%, as luxury and banking stocks weighed on the index. Losses were cushioned by a 3.6% rise for chip maker STMicroelectronics and a 1.2% gain for defense group Thales. Germany’s industrial-heavy DAX edged up 0.2%, helped by a 1.9% gain for software giant SAP after choppy trade last week. Autos in the index slipped. London’s FTSE 100 was flat, as gains for software counter sliding metals and miners and a 2.7% drop for Babcock International. ASML gained 0.5%, helping the Dutch AEX to climb 0.1%. Spain’s IBEX 35 fell 0.3% after a hotter-than-expected inflation print, while the Italian FTSE MIB edges up 0.1%.
—The dollar eased as investors look ahead to jobs data releases. The job openings and labor turnover survey will be released on Tuesday followed by the ADP private payrolls report and Challenger, Gray & Christmas job cuts data on Wednesday. The all-important nonfarm payrolls report will be released Thursday along with weekly jobless claims ahead of Friday’s U.S. public holiday. The data will be closely monitored after the Federal Reserve’s meeting earlier this month boosted market expectations for rate rises. The DXY dollar index fell 0.1% to 101.278, having reached a 13-month high of 101.800 Wednesday.
—U.S. Treasury yields rose slightly in Asian trade, with increases driven by short-end yields, suggesting that markets continue to bet on Federal Reserve interest-rate hikes. The two-year Treasury yield was up 1.6 basis points at 4.103%, while the 10-year yield rose 0.6 basis points to 4.377%, according to Tradeweb.
—Eurozone government bond yields edged up in early trade, potentially signaling limits for further yield falls. The focus on oil, inflation and the European Central Bank’s forum in Sintra, Portugal, could limit the downside for German Bund yields, Commerzbank’s Rainer Guntermann said in a note. “Although oil prices near prewar levels reduce tail risks for economic growth, inflation and rates volatility, inflation is probably not coming down quickly enough to dispel the ECB hawkishness,” the rates strategist said. Government bond supply on Monday will come from Belgium, which will auction 2.6 billion euros to 3 billion euros in 2034-, 2041- and 2056-dated bonds, known as OLOs. The 10-year Bund yield edged up 0.9 basis points to 2.859%, according to Tradeweb.
—Bitcoin rose 0.7% to $60,006, having reached a 21-month low of $58,075 last Thursday, LSEG data show.
—Gold declined as markets are more focused on easing inflation expectations and prospects for resumed peace talks between Iran and the U.S., MUFG’s Soojin Kim wrote. “Gold is likely to remain under pressure as geopolitical risk premiums continue to fade and expectations for lower energy-driven inflation improve,” she added. In New York, gold futures fell 0.4% to $4,078.30 a troy ounce. In London, shares in gold miner Endeavour Mining fell 2.05% while peer Fresnillo dropped around 1%.
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