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Good evening,
Yesterday’s quick rebound in global markets proved premature, as the war in the Middle East intensified today with the US expanding its military presence in the region and Trump calling for Iran’s unconditional surrender after he left the G7 Summit in Canada before schedule. Stocks fell across regions with indices in Wall Street and Europe falling 1%, crude oil ralling 4.5% to $75 for WTI, the $ moving higher and bond prices also advancing.
Trump suggested that the US could participate in the Israel – Iran war after clarifying last week that Israel have make a unilateral decision to attack the islamic nation. War related updates, over trade negotiation headlines or economic data, are driving investor’s sentiment this week.
Israel has not attacked Iran’s oil refineries and over 90% of Iran’s oil exports go to China at a small discount to international crude prices as most countries won’t get involved in Iran’s sanctioned crude.
In economic data today, US retail sales fell 0.9% MoM (+3.3% YoY) in May, worse than expected and the steepest monthly drop since February, despite surveys reflecting an improvement in consumer confidence.
In central bank action, the Bank of Japan kept its policy rate steady at a 17-yr high of 0.50%, as expected and signalled it will pace the sale of its bond holdings due to the uncertainty of trade negotiations with the US. The ¥ was little changed while 10-yr JGB yields shifted 7bp higher to 1.47%. (Reuters)
The Fed meets tomorrow with analysts and markets pricing in a decision to maintain rates unchanged at a 4.25 to 4.50% range but the chances for a rate cut at the late July meeting increased to 14.5% today.
It was a quiet day for corporate deals with Eli Lilly (mcap $711bn), the world’s largest drugmaker, acquiring gene-editing start-up Verve Therapeutics (VERV, mcap $1bn) for up to $1.3bn to increase its pipeline of experimental medicines. Verve shares jumped 81% today and accumulated a 100% gain this year. (FT)
In private markets, Elon Musk’s xAI is in talks to raise $4.3bn in equity funding on top of the $5bn recent debt deal. (Bloomberg)
See you tomorrow.
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