Futures Jump As Dip-Buyers Return After After Iran Truce Holds

Stock futures are higher, completely reversing yesterday's drop with dip-buyers out in force as a fragile ceasefire between the US and Iran held after a day of clashes and sentiment is helped by a pullback in oil prices, with Brent crude futures down 1.4% as well as the US move to return 22 Iranian crew from a seized vessel. The conflict “might need to escalate in order to de-escalate,” making any market weakness a chance to add positions in stocks, according to JPMorgan strategists who said that today is shaping up to be an "Everything Rally." As of 8:00am ET, S&P 500 futures rise 0.3% while Nasdaq 100 contracts add 0.6%. In premarket trading, semis lead gains with Mag7 mostly higher. Cyclicals (ex-Energy) are outpacing Defensives, though healthcare is rallying. Bond yields are down 1-2bp with the 10Y yield dropping to 4.42% and the Dollar catching a bid. Commodities are seeing sales in Energy, precious metals retracing losses, and Ags mixed. US economic data calendar slate includes March trade balance (8:30am), April S&P Global US Services PMI (9:45am), April ISM services and March new home sales and JOLTS job openings (10am). Fed speaker slate includes Bowman (10am) and Barr (12:30pm)

In premarket trading, Mag 7 stocks are mostly higher (Amazon +0.6%, Microsoft +0.4%, Meta +0.2%, Alphabet +0.3%, Nvidia -0.01%, Tesla +0.3%, Apple -0.2%)

Bullish (BLSH) slips 2% after agreeing to buy Equiniti from Siris Capital in a $4.2 billion deal as the crypto exchange seeks to expand in blockchain-based capital markets infrastructure.
Coinbase (COIN) rises 3% after the crypto exchange said it will cut around 14% of its workforce, citing a need to manage costs in volatile markets and amid advances in artificial intelligence.
Eaton (ETN) falls 5% after the power equipment company gave an outlook for second-quarter profit below what analysts expected.
Fabrinet (FN) drops 11%, unable to push higher a 58% year-to-date rally after a third-quarter adjusted earnings per share beat.
Fidelity National Information Services (FIS) gains 5% after the payments processor said it is co-designing a Financial Crimes AI Agent with Anthropic’s Applied AI team.
Firefly Aerospace (FLY) climbs 11% after the space and defense technology company reported revenue for the first-quarter that beat the average analyst estimate.
GeneDx (WGS) sinks 42% after the health care services firm missed first-quarter revenue estimates and cut full-year guidance. Analysts slash price targets.
GlobalFoundries (GFS) gains 5% after posting revenue for the first quarter that matched the average analyst estimate.
Inspire Medical (INSP) falls 18% after the medical devices company slashed its full-year revenue outlook, citing coding and reimbursement uncertainty for Inspire V, an implant to treat moderate-to-severe sleep apnea.
Intel (INTC) rises 3% as Apple has held exploratory discussions about using the company — as well as Samsung Electronics — to produce the main processors for its devices in the US, according to people familiar with the matter.
Iqvia (IQVA) falls 5% after the healthtech firm posted first quarter results.
ON Semiconductor (ON) is down 4% after the chipmaker gave an outlook that is largely in line with expectations. Bloomberg Intelligence wrote that the forecast suggests a recovery in key markets will be slower than hoped.
Palantir Technologies (PLTR) falls 3% even as the software company reported first-quarter results that beat expectations on key metrics, although US commercial sales disappointed. Separately, it raised its full-year forecast.
Pinterest (PINS) jumps 17% after the social-media company reported first-quarter results that beat expectations and gave a full-year revenue forecast that is above the analyst consensus.
Rockwell Automation (ROK) gains 8% after boosting its adjusted earnings per share guidance for the full year.
Shopify (SHOP) falls 7% as the commerce software maker’s revenue outlook suggests growth pace may be slowing down.

In other corporate news, Michael Burry said he sold his entire position in GameStop after it made an offer to buy eBay for about $56 billion, citing concerns about the debt the company could take on for an acquisition. In AI news, ServiceNow projected it would generate $30 billion of subscription revenue in 2030, attributing the strong outlook to traction from its AI products. OpenAI discussed spinning out the company’s robotics and consumer hardware divisions late last year, according to the WSJ. And OpenAI co-founder and President Greg Brockman testified that his stake is now worth almost $30 billion, prompting an attorney for Elon Musk to ask why he had not donated the bulk of his earnings to the ChatGPT maker’s nonprofit foundation.

Relative calm returned to the Persian Gulf on Tuesday after US and Iranian forces exchanged fire the day before and Tehran launched missiles and drones toward the United Arab Emirates. Investors also found reassurance in the fact that a diplomatic push to resolve the impasse continued. While the war in the Middle East may be rumbling on, but JPMorgan’s Mislav Matekja says there are big differences to the 2022 playbook: He doesn’t expect to see stagflation in 2H as wage growth is moving lower. At the same time, equities aren’t complacent beneath the surface, with market breadth still narrow.

Traders have also been cheered by the AI boom and earnings that are beating despite a “very high bar,” according to Deutsche Bank’s Binky Chadha. Stock purchases by the ultimate dip-buyer - Corporate America - are helping to underpin the equity market too. forecast from Advanced Micro Devices Inc. later on Tuesday will offer new evidence of whether the spending wave on artificial intelligence is sustainable.

“Earnings remain the fuel for the US rally,” Madison Faller, global strategist at JPMorgan Private Bank, told Bloomberg TV. “The next question is whether earnings strength can broaden beyond technology. Portfolios need more than just one sector carrying the market.”

Still, concern about the war is showing up in other assets. WTI remains stubbornly above $100, while Goldman Sachs analysts wrote that the “speed of depletion and supply losses in some regions and products are concerning,” highlighting naphtha, jet fuel and liquefied petroleum gas. Diamondback Energy said it’s boosting crude output in response to rising prices caused by the war.

Meanwhile, 30-year Treasury yields remain a touch above 5% having hit the highest since July on Monday on inflation fears and concerns about higher government borrowing estimates.

In tech, Apple has held exploratory discussions about using Intel and Samsung to produce the main processors for its devices in the US, a move that would offer a secondary option beyond longtime partner TSMC. Meta is working on a financing package for a data center in El Paso, Texas, that could total roughly $13 billion, while Alphabet is selling bonds in the euro market just months after its last megabond deal.

Monday’s flareup of violence in the Middle East has injected fresh uncertainty after strong earnings from tech megacaps and gains in chipmakers pushed equities to a succession of records. The violence erupted after President Donald Trump announced “Project Freedom,” which he described as a humanitarian effort to guide stranded neutral ships.

“Project Freedom is a way for the US to gain an upper hand in negotiations,” wrote Mohit Kumar, chief economist and strategist for Europe at Jefferies. “In the coming days, it would become clear whether the US can provide safe passage to the ships and hence can take a much tougher stance.”

In politics, the chairs of key Senate committees unveiled legislation that would greenlight $71.7 billion in spending over the next three years for Trump’s immigration enforcement agenda. A top Senate Republican has proposed spending as much as $1 billion for US Secret Service security adjustments and upgrades, including for Trump’s planned White House ballroom

Of the 322 S&P 500 companies to have reported so far in the earnings season, 82% have beaten analysts’ forecasts, while 12% have missed.

In Europe, the Stoxx 600 is up 0.6% after a sharp selloff on Monday. Technology stocks are leading gains while travel is the biggest laggard. Earnings results have been mixed. AB-InBev shares are rising after first-quarter volume growth moved back into positive territory while HSBC dropped after it reported profit that missed estimates due to an unexpected UK fraud-related charge and rising economic risks from the conflict in the Middle East. EQT raised its offer for product-testing company Intertek to roughly £8.9 billion ($12.1 billion). Here are the biggest movers Tuesday:

AB InBev gains as much as 6.8%, the most since February 2025, after reporting a return to positive volume growth in the first quarter, ahead of expectations for a slight drop
BT Group gains as much as 6.3% in London, the most since July, after BofA raised to buy from neutral, saying its fiber build is on the “final straight” with dividends expected to be the next re-rating lever
UniCredit shares advanced 3%, the best performing stock on the Stoxx 600 Banks Index, after the Italia lender reported a record quarter with strong revenues. KBW analysts expect earnings to be well received
Dormakaba shares gain as much as 5.9% after Oddo BHF upgraded the security systems provider to outperform from neutral, citing the company’s ability to partially close the profitability gap versus leader Assa Abloy
Hugo Boss shares gain 3.4% after the German fashion designer posted first-quarter profits that outpaced expectations. Analysts say strong sales were driven by Asia, notably a return to growth in China
HSBC shares declined as much as 5.6% in London trading after the lender missed estimates in the first quarter, weighed by higher costs and impairments
Fresenius Medical Care shares drop as much as 9.4% to the lowest intraday level since October 2024, after the German company reported weak US dialysis volume for the first quarter
Raiffeisen shares drop as much as 4.1% after the bank reported profits that missed expectations, which analysts said was due to higher provisions and taxes

Asian stocks retreated from their record highs after an exchange of fire between the US and Iran cast doubt on the durability of a four-week ceasefire. The MSCI Asia Pacific Index dropped as much as 0.6%, with TSMC and Delta Electronics among the biggest drags. Markets in Japan, South Korea and mainland China were closed for holidays. Investors are again turning cautious, as heightening tensions around the Strait of Hormuz drove oil prices higher and renewed fears of global inflation. The AI trade is taking a step back after helping the MSCI gauge erase war-led losses and climb to a record high on Monday. Meanwhile, Australia’s benchmark S&P/ASX 200 index ended Tuesday down 0.2%, but pared its earlier decline after the central bank indicated that it may pause interest-rate increases. The Reserve Bank of Australia raised the cash rate to 4.35% on Tuesday, unwinding all of last year’s cycle of monetary easing.

In FX, the Bloomberg Dollar Spot Index is little changed. USD/JPY rises 0.2% to near 157.60 after a choppy European morning session.

In rates, treasuries advance, pushing US 10-year yields down 2 bps to 4.42%. Bunds also climb, led by shorter dated maturities. Front-end Treasuries hold small gains as futures retreat from session highs in early US session, leaving 30-year yield little changed near 5.02%. Rates are underpinned by lower oil prices as investors assess a tenuous four-week Middle East ceasefire. UK 30-year yield reached 5.76%, highest since 1998, as trading resumed after Monday’s holiday.US front-end yields are about 1bp richer on the day, steepening the yield curve slightly; 10-year is little changed near 4.44%. IG dollar issuance slate empty so far but expected to pick up after nine offerings totaling $8.35 billion were priced Monday. Issuers paid less than 2bps in new issue concessions on deals that were 4 times covered. Dealers project a weekly total of about $40 billion. US session features April ISM services report and March JOLTS job openings.

In commodities, WTI crude oil futures are down 1.4%, S&P 500 futures up 0.3%, with supported from cheaper oil as the Middle East ceasefire broadly holds. Precious metals gain with spot silver up over 1%. Bitcoin rises 1% and back above $80,000.

US economic data calendar slate includes March trade balance (8:30am), April S&P Global US Services PMI (9:45am), April ISM services and March new home sales and JOLTS job openings (10am). Fed speaker slate includes Bowman (10am) and Barr (12:30pm)

Market Snapshot

S&P 500 mini +0.3%
Nasdaq 100 mini +0.5%
Russell 2000 mini +0.5%
Stoxx Europe 600 +0.5%
DAX +1%
CAC 40 +0.6%
10-year Treasury yield -1 basis point at 4.43%
VIX -0.5 points at 17.78
Bloomberg Dollar Index little changed at 1196.35
euro little changed at $1.1684
WTI crude -1.9% at $104.38/barrel

Top Overnight News

Trump’s desire to end the Iran war is being put to the test after Tehran fired at American warships on Monday and violently disrupted a U.S. effort to revive shipping in the Strait of Hormuz. Still, Trump wants to avoid a fresh bombing campaign, officials say, preferring a negotiated end to Tehran’s nuclear advancements and the weekslong war that has raised gas prices and hurt the global economy. WSJ
U.S. intelligence assessments indicate that the time Iran would need to build a nuclear weapon has not changed since last summer, when analysts estimated that a U.S.-Israeli attack had pushed back the timeline to up to a year. The unchanged timeline suggests that significantly impeding Tehran's nuclear program may require destroying or removing Iran's remaining stockpile of highly enriched uranium, or HEU. RTRS
Trump says war could stretch 3 more weeks, claims US 'already won.’ ABC
Iraq is offering discounts for crude loaded this month, with tankers having to transit the Strait of Hormuz to collect the barrels. The discounts include as much as $33.40 a barrel for Basrah Medium crude, according to a notice from state oil marketer SOMO: BBG
Trump said he’s looking forward to seeing Xi Jinping, signaling his plans for the high-stakes summit later this month are still on despite fresh tensions.
Australia’s central bank has raised interest rates for a third time this year, bucking a trend among global peers as it fights inflationary pressures intensified by the conflict in the Middle East. The Reserve Bank of Australia on Tuesday raised its borrowing rate to 4.35 per cent. The move, its third consecutive rise, undid the effect of three cuts last year. FT
SEC Chairman Paul Atkins said the agency is probing fraud allegations at private credit firms. BBG
Switzerland’s inflation quickened to a 16-month high in April as energy costs jumped. Consumer prices rose 0.6% from a year earlier. BBG
The US is weighing an executive order to create an AI working group and a review process for new models. NYT
Apple Inc. has held exploratory discussions about using Intel Corp. and Samsung Electronics Co. to produce the main processors for its devices in the US, a move that would offer a secondary option beyond longtime partner Taiwan Semiconductor Manufacturing Co. INTC +380bps premkt. BBG
Japan can conduct only two more sessions of three-day interventions by November to maintain its status of having a freely floating exchange rate, based on International Monetary Fund guidelines: BBG
Ahead of Race to IPO, OpenAI Discussed Spinning Out Robotics, Hardware Divisions: WSJ
The European Union has tools it can use if Donald Trump makes excessive threats to strategic industries, according to French Trade Minister Nicolas Forissier: BBG

Iran War

US President Trump said Iran war could go on for another two to three weeks; time is not of the essence.
IRGC military source told Tasnim that the US shot two small boats carrying civilians instead of shooting IRGC speedboats.
"Iranian Defense Council member Ali Akbar Ahmadian: Our security does not accept negotiations, and Washington obstructed global navigation and energy security", Al Jazeera reported.
Iranian President Pezeshkian has requested an immediate and emergency meeting with Supreme Leader Khamenei to ask him to stop IRGC attacks on Persian Gulf nations and prevent a recurrence, Iran International reported. Pezeshkian reportedly outlined that the IRGC attack on the UAE occurred without the knowledge of the government.
US intelligence suggests strikes from the start of the war led to limited new damage to Iran's nuclear programme, Reuters sources say.
US State Department official to Al Jazeera said the President is clear that direct communication between Israel and Lebanon is the best path toward peace; We are working to prepare the necessary conditions and political momentum to move forward with this
Two US Navy destroyers transited the Strait of Hormuz and entered the Persian Gulf after navigating an Iranian barrage, according to defense officials who spoke to CBS News; "Iran launched small boats, missiles and drones against them".
Maersk (MAERSKB DC) said its subsidiary's US-flagged vehicle carrier, Alliance Fairfax, exited the Gulf via Strait of Hormuz on May 4th.
US Treasury Secretary Bessent had a "fierce row" with UK Chancellor Reeves last month over her outspoken criticism of the Iranian war, FT sources say.
US CENTCOM posted "US warships and aircraft deployed to the Middle East are enforcing the naval blockade against Iran while executing Project Freedom to support the free flow of commerce through the Strait of Hormuz.".
US officials say military closer to resuming combat operations than 24 hours ago, Fox reported.
US President Trump reiterates he feels Europe has been "very disappointing".
Iranian Foreign Minister Araghchi posted "As talks are making progress with Pakistan's gracious effort, the US should be wary of being dragged back into quagmire by ill-wishers. So should the UAE.". Full post:"Events in Hormuz make clear that there's no military solution to a political crisis. As talks are making progress with Pakistan's gracious effort, the U.S. should be wary of being dragged back into quagmire by ill-wishers. So should the UAE.Project Freedom is Project Deadlock.".
Mehr News Agency said a fire broke out in two commercial ships and spread to two others in Dayyer port south of Iran; cause not clear.
"Explosions were heard tonight in the port of Bandar Abbas (Iran) and on Qassem Island (Iran) in the Persian Gulf", N12 journalist reported citing sources in Iran.
IRGC political deputy said traffic in the Strait of Hormuz will only be done with Iran's permission, ISNA reported; "Any kind of traffic in the Strait of Hormuz, if it is from the enemy, will be met with a decisive and crushing response".
Iranian Parliamentary Speaker Ghalibaf said the new equation of the Strait of Hormuz is being solidified. Actions of the US and allies have threatened the security of shipping and energy.
UNSC resolution prepared by the US, Saudi Arabia, Bahrain, Qatar, the UAE, and Kuwait opens the door for potential enforcement measures, AsharqNews reported citing the resolution "to be distributed tomorrow".

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded lower following a weak Wall Street lead, with liquidity thin amid widespread market holidays across Japan, South Korea, and Mainland China. ASX 200 was pressured by weakness in the metals sector, while Westpac declined after a miss in H1 net income. Focus also turned to the RBA, which delivered its third consecutive 25bps rate hike as expected. Hang Seng followed the negative tone, led lower by tech, while mainland markets remained shut, and Stock Connect flows were absent.

Top Asian News

Foxconn (2317 TW) April (TWD): Revenue 832bln, +29.7% Y/Y. Q2 is expected to show both Q/Q and Y/Y growth.

European bourses opened mixed, but now display a clear positive bias alongside a move lower in crude prices this morning. The Euro Stoxx 50 (+0.9%) is the top performing index, whilst the FTSE 100 (-1%) is the clear laggard, as it returns from holiday and digests the recent US-Iran escalation. European sectors hold a positive bias this morning. Construction tops the pile, buoyed by post-earning strength in Geberit (+1.7%, robust results and sees strong demand across several markets). Chemicals and Financial Services complete the top three. To the downside reside Basic Resources and then Banks. The latter has been dragged down by losses in HSBC (-5%), after the Co. reported a Q1 profit miss and estimates higher than expected credit losses. Gains in UniCredit (+3%) are failing to lift the sector, with the Italian bank reporting strong profit and robust investment income. US equity futures are in the green this morning, and attempting to pare back some of the modest weakness seen in the prior session. Fed speak today includes Barr and Bowman. As for key movers today, Palantir (-2%, stronger results and lifted guidance, but US commercial revenue fell short of expectations). Elsewhere, ON Semiconductor (-4.7%, strong results, though missed on lofty expectations).

Top European News

Swiss Inflation Rate YoY (Apr) Y/Y 0.6% vs. Exp. 0.6% (Prev. 0.3%, Low. 0.2%, High. 0.4%).
Swiss Inflation Rate MoM (Apr) M/M 0.3% vs. Exp. 0.4% (Prev. 0.2%, Low. 0.2%, High. 0.7%).
Spanish Unemployment Change (Apr) -62.7K vs. Exp. -18.6K (Prev. -22.9K).

DXY is steady and trades within a narrow 98.40 to 98.57 range, with geopolitical newsflow overnight relatively light and as markets await the US data docket later. The index currently trades in close proximity to its 21-DMA (98.50), 100-DMA (98.46) and 200-DMA (98.55). No doubt attention ahead will be on any geopolitical developments, but domestically, traders will also eye US ISM Services, PMI Finals, JOLTS and a couple of Fed speakers.
Antipodeans are diverging this morning, with the Kiwi marginally topping the G10 pile whilst the Aussie lags. This is largely a function of a weaker AUD, after the RBA’s decision to hike its policy rate by 25bps (as expected). The accompanying statement was also net-hawkish, having suggested that second-round effects are beginning to emerge. In an immediate reaction, AUD/USD jumped higher to make a session peak at 0.7171 (vs trough 0.7135), before then gradually trundling lower soon after. The move lower is potentially a function of traders now taking out bets of future tightening, after three consecutive hikes. Particularly as in the presser, the Governor outlined they now have the policy space to wait and see. Markets currently do not assign much probability to a hike in June, before fully pricing in a hike by September.
JPY was flat for much of the European morning, but is now a touch lower after a recent spike higher in USD/JPY - a move which lacked a fundamental driver. The pair jumped to form a session high at 157.88 (from 157.28), before then immediately paring back towards 157.47. Most recently, a knee jerk lower was seen in the pair, with an aggressive move lower from 157.56 to 157.12, before once again moving back towards 157.50.
CHF is near enough unchanged vs the USD, and incrementally firmer against the EUR; EUR/CHF currently hovers just above its 50-DMA at 0.91554. Some modest pressure was seen in the Swiss Franc after the region’s April inflation report, whereby the M/M metric increased by less than expected, though the Y/Y figure doubled amidst the Iranian war.

Central Banks

RBA hikes its Cash Rate by 25bps as expected to 4.35%; via 8-1 vote (one voted to maintain rate at 4.10%); said inflation likely to remain above the target and risks remain tilted to the upside. DECISION. Board assessed that inflation is likely to remain above target for some time and that the risks remain tilted to the upside, including to inflation expectations. It was therefore judged appropriate to increase the cash rate target. The Board will be attentive to the data and the evolving assessment of the outlook and risks to guide its decisions. Having raised the cash rate three times, monetary policy is well placed to respond to developments. It will do what it considers necessary to achieve that outcome. INFLATION. Inflation picked up materially in the second half of 2025, and information since the beginning of this year confirms that some of this increase reflected greater capacity pressures. There are early signs that many firms experiencing cost pressures are looking to increase prices of their goods and services. Short-term measures of inflation expectations have also risen. There are plausible scenarios where inflation is higher and activity lower than envisaged under the baseline forecast. MIDDLE EAST. A longer or more severe conflict could put further upward pressure on global energy prices; this would push up near-term inflation and could also increase inflation further out as these costs are passed through and if price rises get built into longer term inflation expectations.
RBA Governor said if second round effects move through to expectations it could result in a need for higher rates. Current cash rate is a "bit" restrictive, provides some space to see how the Middle East situation develops. Have the policy space to wait and see. Extensive debate about the decision to hike.

Fixed Income

A contained morning for USTs and Bunds given ongoing APAC holidays and after the significant bearish action seen on Monday amid energy upside of as much as USD 6/bbl in Brent.
Gilts, unsurprisingly, lag with downside of 84 ticks at most to an 86.19 base, taking out the 86.36 low from Friday and now looking to the figure and then the 85.90 contract trough. Underperformance is a function of Gilts playing catch-up after Monday's holiday, similar action seen in the FTSE 100. Otherwise, the UK docket is light, and the benchmark will likely conform directionally to peers, and as such may well retrace some of the discussed downside, in a similar fashion to peers late-Monday.
For the UK, we continue to count down to Thursday's local elections, the results of which could be the tipping point against PM Starmer, particularly if his own council (Camden) shifts against Labour as the latest polls indicate it might, in a pivot to The Greens. On the leadership, The Times reports that Labour MPs are discussing plans to demand Starmer set a resignation date, in a move akin to that taken by allies of Brown against Blair.
USTs are currently a few ticks firmer in 110-05+ to 110-12 parameters, at the lower end of Monday's 110-00+ to 110-26+ band. Ahead, a number of data points of note alongside remarks from Fed's Bowman and Barr. However, there is every chance that action is once again dominated by geopolitics.
Bunds are a few ticks lower in a narrow 124.85 to 125.03 band, similarly at the lower end of Monday's 124.68 to 125.51 confines. Specifics for the bloc light thus far, though we do look to a text release from ECB's Lane; however, the topic is focused on the climate, rather than monetary policy.
Alphabet (GOOGL) commences a six-part EUR-denominated bond offer.
Germany sells EUR 0.993bln vs exp. EUR 1.0bln 2.10% 2029 and EUR 0.483bln vs exp. EUR 0.5bln 2.50% 2035 Green Bunds.

Commodities

Crude in the red, as energy generally eases off the highs printed on Monday, where Brent briefly posted gains in excess of USD 6/bbl at a USD 115.30/bbl peak, a conflict high for the July contract. As it stands, Brent is below USD 113.00/bbl, but remains markedly clear of the week's USD 106.60/bbl open.
Overnight, specifics were bullish for energy, but the magnitude of Monday's move meant the space failed to benefit. In brief, US President Trump said the conflict could continue for another three weeks, and time is not of the essence. Furthermore, a Fox report suggests the US is closer to resuming combat activity vs 24hrs prior. From the Iranian side, reports around recent strikes and who knew in advance point to ongoing or even further fractures within the leadership.
Dutch TTF in-fitting, lower and holding around EUR 47.70/MWh vs a EUR 49.23/MWh peak on Monday; however, this left it markedly shy of recent levels, which run as high as EUR 73.41/MWh
Spot gold firmer, benefitting from lower energy prices and the respite it has provided to the USD. XAU peaked at USD 4558/oz just after the European cash equity open and remains in proximity to its best levels. Ahead, Fed speak, and US data dominate from a scheduled perspective.
Base metals firmer on the return of LME, following the broader risk tone, though with mainland China still away, the magnitude is limited thus far. 3M LME Copper firmer and back above USD 13k.
Glencore (GLEN LN) confirms that an incident occurred earlier today at the zinc smelting unit of the Ust-Kamenogorsk Metallurgical Complex.
Iraq is offering term buyers discounts of USD 33.40/bbl on Basrah Medium for May loading, Bloomberg reported citing a 3rd of May notice.

US Event Calendar

8:30 am: United States Mar Trade Balance, est. -60.95b, prior -57.3b
9:45 am: United States Apr F S&P Global US Services PMI, est. 51.3, prior 51.3
9:45 am: United States Apr F S&P Global US Composite PMI, est. 52.1, prior 52
10:00 am: United States Apr ISM Services Index, est. 53.7, prior 54
10:00 am: United States Mar New Home Sales, est. 652k
10:00 am: United States Mar JOLTS Job Openings, est. 6850k, prior 6882k
10:00 am: United States Fed’s Bowman Speaks at Washington Financial Symposium
12:30 pm: United States Fed’s Barr Speaks on Banking Regulation

DB's Jim Reid concludes the overnight wrap

As those in the UK return from the May Bank Holiday, global market sentiment has made a cautious start to the week, with renewed attacks in the Gulf casting doubt on the state of the four-week-old ceasefire between the US and Iran as both the sides look to exert influence over the Strait of Hormuz. Amid the heightened tensions, Brent crude rose +5.80% on Monday before edging -1.18% lower to $113.09/bbl this morning. An ensuing global bond sell-off saw 10yr Treasury yields (+6.8bps) reach a 9-month high of 4.44%, while 30yr yields moved back above 5%. The S&P 500 (-0.41%) also slipped from Friday’s record highs, and while S&P futures are edging +0.13% higher overnight, the Asian markets that are trading today are overwhelmingly in the red.

Markets have faced a flurry of Middle East headlines since Sunday night. The most sustained negative reaction came just before the European close yesterday as the UAE came under missile attacks for the first time since the ceasefire began on April 8, with a fire also breaking out at its oil terminal in Fujairah following a drone attack. The latter has been of increased importance to oil markets as the UAE has been transporting close to 2mmb/day of oil via pipeline to the Fujairah port while Hormuz shipping has been disrupted. Meanwhile, the US military said it had fought off attacks from Iranian drones, missiles, and small boats, as two US warships crossed the Strait of Hormuz along with two US-flagged merchant vessels. That move followed Trump’s announcement on Sunday of “Project Freedom" to help stranded vessels exit the Persian Gulf, though the exact scope of this operation remains unclear. Trump posted yesterday that Defense Secretary Hegseth will be holding a press conference today together with the chairman of the Joint Chiefs of Staff, General Caine. From Iran’s side, Foreign Minister posted last night that "events in Hormuz make clear that there's no military solution to a political crisis", while also suggesting that talks with the US were “making progress”.

Earlier yesterday, Iran’s military had warned that the strait remains closed, with reports of a couple of ships coming under attack. Oil prices spiked after Iranian media reported that its missiles had struck a US naval ship, but this move reversed after denials by the US and follow-up Iranian reporting of a “warning shot”. However, the relief proved short-lived and by the close, Brent crude rose +5.80% to $114.44/bbl, having traded below $106/bbl at Monday’s open in Asia. WTI rose +4.39% to $106.42/bbl. Oil markets also moved to price rising risks of persistent disruption, with 6-month Brent futures (+5.25%) posting their largest daily increase since March 2022 to reach a new post-2022 high of $91.99/bbl.

While oil prices pulled back a bit overnight, equity markets in Asia are pulling back from gains in the previous session. As I check my screens, the Hang Seng (-1.16%) is underperforming after a +1.24% rise yesterday, while the S&P/ASX 200 (-0.44%) also sliding following the RBA’s rate decision (details below). Meanwhile, markets in Japan, China and South Korea are closed today.

In term of yesterday’s moves, the rise in oil prices reignited concerns about inflationary pressures, with the 2yr inflation swap in the US rising +6.0bps to 3.13%, the highest since November 2022. In turn, that led to hawkish central bank repricing and pushed yields higher. Fed funds futured moved to price 17bps of hikes by next April (+11.5bps on the day), despite New York Fed Chair Williams arguing that the Fed will need to lower rates “at some point” if inflation drops to the 2% target as he expects for 2027. 2yr Treasury yields rose +7.4bps to 3.95%, while 10yr yields were up +6.8bps to 4.44% and 30yr yields +5.6bps to 5.01% as both reached their highest levels since July last year.

The higher oil and rates backdrop weighed on equities, with the S&P 500 retreating by -0.41% from Friday’s record high in a broad-based decline that saw 70% of S&P constituents lower on the day. Industrials (-1.17%) and materials (-1.57%) stocks led the decline, while energy (+0.85%) stocks were the only major sector to advance. Tech stocks also showed some resilience, with the NASDAQ (-0.19%) and the Mag-7 (+0.04%) little changed on the day. With tech stocks leading strong Q1 earnings growth in the US, the S&P 500 is +13.5% above its low on March 30, even as Treasury yields and longer-dated oil futures have reached new post-Iran war highs. For more on the earnings season takeaways, see yesterday’s update by our US equity strategists here.

Over in Europe, equities struggled even more, with the STOXX 600 falling -0.99%, while DAX (-1.24%), CAC (-1.71%) and FTSEMIB (-1.59%) posted even larger declines. The STOXX Autos index (-1.94%) underperformed, with the likes of Mercedes-Benz (-3.35%), Volkswagen (-2.81%) and BMW (-2.44%) sliding. This followed Trump’s threat on Friday to increase tariffs on auto imports from the EU back up to 25% as he claimed that the EU was “not complying” with the trade deal reached last summer.

European bonds mostly matched the US moves, with 10yr bund yields rising by +5.0bps to 3.08%, while OATs (+6.3bps) and BTPs (+7.8bps) saw larger increases amid the risk-off-tone. And the rise was larger at the front-end, with 2yr bund yields rising +7.8bps as markets moved to price a 99% likelihood of a June ECB hike by yesterday’s close. Adding to the baseline view of a June ECB hike, Germany’s Nagel said that the ECB would need to hike rates in June “if the inflation outlook does not improve markedly”, echoing similar comments he made last Friday.

On the data front, solid US data continued, with March factory orders jumping by +1.5% (vs. +0.6% expected) amid surging demand in segments related to the AI build out. Meanwhile, the Fed’s Q2 Senior Loan Officer Survey showed mostly stable bank credit conditions despite the Iran energy shock, albeit with a marginal tightening for corporate lending.

Turning back to overnight news, in Australia the RBA has hiked rates for a third meeting in a row to 4.35% as we go to print. The decision came in a hawkish-leaning 8-1 vote, a much more decisive split than the 5-4 vote in March, though the RBA’s press release does suggest a degree of patience moving forward as “Having raised the cash rate three times, monetary policy is well placed to respond to developments”.

Sweden’s Riksbank and Norway’s Norges this Thursday will finish up the current round of G10 rate decisions. There will also be lots of Fed and ECB speakers following their meetings last week. See the full day-by-day schedule below.

In terms of the rest of this week’s events, the main highlight will be the US jobs report on Friday. Our economists see payrolls rising +50k in April, close to the breakeven rate and down from +178k in March, with a slightly faster earnings growth rate (+0.3% vs +0.2% in March) and a stable unemployment rate (4.3%). Other US labour market indicators will include the JOLTS survey today and the ADP report on Wednesday. We will also get the ISM services index today and the University of Michigan’s consumer survey for May on Friday. And tomorrow will see the quarterly US Treasury refunding announcement. Our rates strategists preview the event here along with their forecasts.

Elsewhere, we will see the final May services PMIs from China and Europe tomorrow, while European releases also include April CPI reports in Switzerland (Tuesday) and Sweden (Wednesday), as well as March industrial production, factory orders, and trade in Germany. In politics, the focus will be on the local elections in the UK on Thursday.

Finally, this week’s earnings schedule includes AMD and CoreWeave on the tech side and big consumer stocks Walt Disney and McDonald’s. In Europe, earnings releases include Shell, Leonardo, Ferrari and AB InBev. In Japan, the list includes Toyota, Sony and Nintendo.

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