- Asian stocks rise as investors embrace renewed risk appetite.
- Brent and US crude oil fall as supply concerns ease.
- The dollar weakens as falling energy prices ease inflation concerns.
Stock markets rose in Asia on Monday as the dollar fell and oil prices fell as news that the United States had agreed to a peace deal with Iran boosted risk sentiment and promised to ease inflationary pressures globally.
Prime Minister Shehbaz Sharif said on social media early Monday that a deal had been reached, while President Donald Trump said the deal included opening the vital Strait of Hormuz, although without giving details.
Iran said traffic through the strait would be regulated by it and Oman, a possible blow to free trade rules and suggesting there could be some form of toll on shipping.
“The lack of detail, especially around shipping freedom, is a concern, but not one that should limit markets today as the rise in risk appetite develops,” said Sean Callow, senior currency analyst at ITC Markets.
“The prospect of a sustained decline in energy prices changes the conversation for central banks just ahead of an avalanche of policy decisions.”
The news will come as a relief to the host of central banks meeting this week, easing some of the pressure to tighten policy to avoid an energy-driven rise in inflation expectations.
Markets had already priced in a possible deal, but the confirmation was enough for Brent crude LCOc1 to fall 4% to $83.80 a barrel, a far cry from its May high of $126.41.
US crude oil CLc1 fell 4.3% to $81.23 a barrel, but was still above the $67 level it was trading at before the war began.
S&P 500 ESc1 futures rose 0.8%, while Nasdaq NQc1 futures rose 1.4% amid a general rise in risk assets. Nikkei NKc1 futures rose 2% to 68,685, well above Friday’s cash close of 66,020.N225.
Central banks are meeting this week in the United States, the United Kingdom, Japan, Australia, Switzerland, Sweden, Norway and Russia, with Japan seen as the country most likely to raise rates this time.
The Federal Reserve is widely expected to leave rates at 3.50%-3.75% on Wednesday at Chairman Kevin Warsh’s inaugural meeting. The statement, economic projections and news conference will be scrutinized for any signs that the Fed will abandon its easing trend as officials become more aggressive on inflation risks.
Investors were quick to reduce chances of a rally this year, with December futures up four points. A move already in October now had a price of around 40%.
Treasury futures also rose on hopes that oil prices will now fall sustainably and reduce upside risks to inflation. 10-year note futures rose 10 ticks TYc1.
Falling yields and overall improving risk sent the US dollar broadly lower, with the euro up 0.4% at $1.1608 EUR=EBS. The dollar fell 0.2% against the yen to 159.93 JPY=EBS, while the pound sterling rose 0.3% to 1.3446 GBP= dollars.
The Bank of England is expected to keep rates at 3.75% on Thursday until 2026, and authorities appear in no rush to tighten them. The Bank of England vote split and monetary policy report will be of interest.
Top-line UK data includes inflation and retail sales for May, and employment for April. Thursday’s Makerfield election will also be closely watched as a victory for Labor mayor Andy Burnham could trigger a leadership contest against First Minister Keir Starmer.
In commodity markets, falling yields helped non-interest-bearing gold rise 1.4% to $4,280 an ounce.
