By Harry Robertson and Rodrigo Campos
LONDON/NEW YORK, June 29 (Reuters) – A global gauge of stock markets rose on Monday as investors tracked the implementation of an interim peace deal between Iran and the U.S., even as oil prices rose after tit-for-tat attacks underscored the risk of escalation.
European equities edged lower, but Wall Street led gains with technology shares rebounding after last week’s selloff driven by concerns over AI spending.
A return to diplomacy in the Middle East would follow several days of strikes since an Iranian projectile hit a cargo vessel in the Strait of Hormuz last week, with both sides accusing each other of breaking an interim ceasefire.
Oil prices were volatile, with both Brent and WTI up more than 1% on the day but still sharply lower for the month. Recent U.S. and Iranian attacks highlighted the fragility of the interim deal, while expectations of a recovery in energy shipments through the Strait of Hormuz capped gains.
“The market can take some relief in the lower oil prices and its impact on the global economy,” Mohit Kumar, chief European economist at Jefferies, said.
“Lower oil prices should lead to a diversification trade and growth-sensitive sectors which have suffered in the last few months should outperform.”
U.S. crude rose 1.7% to $70.41 a barrel and Brent rose to $72.88 per barrel, up 1.24% on the day.
The Dow Jones Industrial Average rose 302.53 points, or 0.58%, to 52,175.22, the S&P 500 rose 37.66 points, or 0.51%, to 7,391.68 and the Nasdaq Composite rose 205.04 points, or 0.79%, to 25,497.22. MSCI’s gauge of stocks across the globe rose 4.41 points, or 0.38%, to 1,107.01.
“There have been several false starts in peace negotiations. I would expect most market participants to remain in a holding pattern through the rest of this week,” said Peter Andersen, founder of Andersen Capital Management.
The pan-European STOXX 600 index fell 0.1%, while Europe’s broad FTSEurofirst 300 index fell 2.18 points, or 0.09%.
Emerging market stocks rose 1.00 points, or 0.06%, to 1,707.40 while Japan’s Nikkei rose 107.23 points, or 0.15%, to 69,468.11.
RATE HIKE WAGERS
Oil prices have fallen sharply in recent weeks but measures of inflation have nonetheless jumped in the U.S. and rising expectations of a Federal Reserve rate hike have lifted the dollar. The dollar index, which measures the U.S. currency against peers, was last slightly lower at 101.25, just below the 13-month high it touched last week. [FRX/]
“There’s still plenty of risk facing the oil market. Even so, participants appear to be … focusing on what a continued recovery in oil flows would mean for the global balance,” ING analysts said in a note on Monday.
The main focus for the U.S. economy this week will be Thursday’s jobs report for June. Three consecutive months of stronger-than-expected payrolls have reinforced the Fed’s hawkish shift, though any cooling in the labor market could prompt a more dovish reassessment.
Investors are pricing in at least one Fed hike this year, a sharp reversal from expectations of two rate cuts before the Iran war.
“The labor market appears to have accelerated,” said Marc Chandler, chief market strategist at Bannockburn Global Forex. “The concerns that the doves had pointed to about labor markets slowing down seem to have passed.”
The Japanese yen hit a 40-year low at 161.97 per dollar, its weakest since 1986.
“The Bank of Japan’s long-awaited 25bp rate hike to 1.00% has done little to offset the still-wide interest rate differential with the United States, especially after the Federal Reserve maintained a hawkish stance and signaled rates are likely to remain elevated for longer,” analysts at LMAX Group said in a report.
The rising dollar has weighed on gold, which was down 1.3% at $4,034 per ounce. The yellow metal is set for a 13% decline in the second quarter, its biggest quarterly drop since 2013. [GOL/]
(Reporting by Ankur Banerjee in Singapore, Harry Robertson in London and Rodrigo Campos in New York. Additional reporting by Karen Brettell and Alex Lawler. Editing by Aidan Lewis, Andrew Heavens and Mark Potter)