- Asian shares rise as investors embrace renewed risk appetite.
- Brent and US crude tumble to ease supply concerns.
- The dollar weakens as falling energy prices ease inflation concerns.
Stock markets rose in Asia on Monday, while the dollar fell and oil prices fell as news that the United States had agreed to a peace deal with Iran boosted risk-on 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, without giving details.
Iran said traffic through the strait would be regulated by the country and Oman, a potential blow to free trade rules, and suggested there could be some kind of toll on shipping.
“The lack of detail, particularly on freedom of shipping, is a concern but not one that should constrain markets today as the increase in risk appetite plays out,” said Sean Callow, a senior currency analyst at ITC Markets.
“The prospect of a sustained decline in energy prices is changing the conversation for central banks just ahead of a flurry of policy decisions.”
The news will come as a relief to the crowd of central bankers meeting this week, easing some of the pressure to tighten policy to head off an energy-driven rise in inflation expectations.
Markets had already priced in a likely deal, but the confirmation was enough to send Brent LCOc1 crude down 4% to $83.80 a barrel. barrel, well off the May peak of $126.41.
US crude CLc1 fell 4.3% to $81.23 a barrel.
S&P 500 futures ESc1 rose 0.8%, while Nasdaq futures NQc1 jumped 1.4% amid a general rise in risk assets. Nikkei futures NKc1 rose 2% to 68,685, well above Friday’s cash close of 66,020 .N225.
Central banks are due to meet in the US, UK, Japan, Australia, Switzerland, Sweden, Norway and Russia this week, with Japan seen as the most likely to raise interest rates this time.
The Federal Reserve is widely expected to leave interest rates at 3.50%-3.75% on Wednesday at Chairman Kevin Warsh’s debut meeting. The statement, economic projections and the news conference will be scrutinized for any signs that the Fed is dropping its easing bias as officials grow more hawkish on inflation risks.
Investors were quick to trim the chance of a rise this year with December futures up 4 ticks. A move already in October was now priced around 40%.
Treasury futures also rose on hopes that oil prices would now fall sustainably and reduce upside risks to inflation. Futures for 10-year notes rose by 10 crosses TYc1.
The drop in interest rates and general improvement in risk dragged the US dollar broadly lower, with the euro up 0.4% to $1.1608 EUR=EBS. The dollar dipped 0.2% on the yen to 159.93 JPY=EBS, while the pound rose 0.3% to $1.3446 GBP=.
The Bank of England is expected to keep interest rates at 3.75% on Thursday until 2026, when policymakers are in no rush to tighten. The BoE’s vote breakdown and monetary policy report will be of interest.
Top-tier UK data includes May inflation and retail sales, and April employment. Thursday’s Makerfield election will also be watched as a victory for Labor mayor Andy Burnham could set up a leadership contest against Prime Minister Keir Starmer.
In commodity markets, the fall in interest rates helped non-interest-paying gold climb 1.4% to $4,280 a barrel. ounces.
