The rally in the main European indices triggered by the preliminary agreement in the Middle East appears to be moderating whilst further details on its terms are awaited. The IBEX 35 rose by 0.7% and the Euro Stoxx 50 closed up 0.4%.
In the Asia-Pacific region, the Hong Kong Hang Seng recorded the sharpest fall (1.4%), whilst the Japanese Topix fell by 0.2%. In China, consumer spending and investment plummeted in May to levels not seen since the pandemic, with retail sales falling by 0.6% year-on-year, despite strong export growth driving industrial production. The fall in retail sales and investment has reignited doubts about the ability of these indicators to accurately reflect economic health, with growth estimated at 4 per cent.
Whilst the US and Iran prepare to formally sign their provisional peace agreement this Friday, the G7 summit highlights the diplomatic and logistical weaknesses of the pact, as Iran plans to impose tolls after 60 days and European allies are making demilitarisation conditional on a complete cessation of hostilities, warning that a full resumption of trade will take weeks.
The rally in share prices to near-record highs is losing momentum ahead of tomorrow’s announcement of the Federal Reserve’s first interest rate decision under Kevin Warsh’s chairmanship.
Yields on major sovereign bonds fell slightly today, against a backdrop where the probability of the Fed implementing its first 25 bp rate rise of the year in December has eased to 80 per cent.
The Bank of Japan raised its benchmark interest rate by 25 bp to 1 per cent, the highest level since 1995. The yen, which has remained under pressure despite the BoJ’s gradual increases in borrowing costs, pared its gains against the dollar, whilst domestic bonds recorded declines.
Consequently, the yield on the 10-year Bund fell by 3 bp to 2.93% and the Spanish benchmark by 3 bp to 3.35%. The 10-year Treasury fell by 5 basis points to 4.43%.
Qualcomm is in talks to acquire Tenstorrent, an AI chip start-up, for between $8,000 and $10,000 million.
Brent crude oil stands at $80 a barrel for the first time in more than three months following the agreement between the US and Iran. The reopening of the Strait of Hormuz is expected to lead to an increase in production in the Middle East and the release of millions of barrels of oil stored on tankers within the Persian Gulf.
