Easing Middle East Tensions May Lead To Initial Strength On Wall Street

The major U.S. index futures are currently pointing to a higher open on Monday, with stocks likely to move to the upside following the mixed performance seen during last Friday’s session.

Early buying interest is likely to be generated in reaction news that U.S. President Donald Trump has halted nearly two weeks of attacks on Iran to allow more room for diplomacy.

“He’s giving talks some space, he’s giving it a little bit of room,” U.S. ambassador to the United Nations Mike Waltz told Fox News on Sunday.

Iran subsequently stopped conducting counterattacks and said it had made progress in talks with Oman on management of the Strait of Hormuz.

The news has led to a steep drop by the price of crude oil, with U.S. crude oil futures plunging by more than 6 percent.

Treasury yields have slumped along with the price of crude oil, easing concerns about the outlook for interest rates ahead of the Federal Reserve’s monetary policy meeting this week.

“Sentiment has received a further boost from a sizzling stock market debut in China by silicon chip maker CXMT,” said AJ Bell investment director Russ Mould.

He added, “Its near five-fold surge may help to soothe concerns about the AI trade after slumps in SpaceX and Korea’s SK Hynix after their recent offerings.”

Following the sell-off seen during Thursday’s session, stocks saw considerable volatility over the course of the trading session on Friday. The major averages showed a notable move to the upside in morning trading before coming under considerable pressure in the afternoon.

The major averages eventually ended the day mixed. While the Nasdaq slid 161.87 points or 0.6 percent to 24,975.82, the S&P 500 inched up 3.68 points or 0.1 percent to 7,411.98 and the Dow climbed 235.60 points or 0.5 percent to 51,947.25.

The tech-heavy Nasdaq tumbled by 2.1 percent for the week, closing below 25,000 for the first time since late April. The S&P 500 and Dow posted more modest weekly losses, falling by 0.6 percent and 0.4 percent, respectively.

The strength that emerged on Wall Street in morning trading came amid a sharp pullback by the price of crude oil, with U.S. crude oil futures tumbling by more than 2 percent after soaring by more than 6 percent on Thursday.

The steep drop by the price of crude oil partly came in reaction to a report from Reuters indicating Pakistan is exploring a path towards a resumption of stalled U.S.-Iran talks over ending the conflict.

Crude oil prices remain well off the lows seen earlier this month, however, as the U.S. and Iran continue to exchange attacks.

After the United States launched its 13th consecutive night of strikes on Iranian targets, Tehran retaliated with missile attacks targeting neighboring Arab countries hosting U.S. military bases.

The subsequent pullback by stocks in afternoon trading may have reflected renewed tariff concerns after President Donald Trump threatened to impose substantial tariffs on the European Union over the substantial fines the bloc has levied against major U.S. tech companies.

The Trump administration previously announced is imposing tariffs on 60 economies for their failure to impose and effectively enforce a prohibition on the importation of goods produced with forced labor.

The tariffs, ranging from 10 percent to 12.5 percent, would impact major economies like the European Union, the U.K., China, India, Japan and Canada. The measures replace a temporary 10 percent global tariff that expires today.

Semiconductor stocks showed a substantial move to the downside on the day, resulting in a 4.3 percent nosedive by the Philadelphia Semiconductor Index.

Intel (INTC) led the sector lower, with the chipmaker plunging by 7.9 percent despite reporting second quarter results that exceeded estimates and providing upbeat third quarter guidance.

Computer hardware and networking stocks also came under pressure, contributing to the extended slump by the tech-heavy Nasdaq.

On the other hand, airline stocks surged amid the sharp pullback by crude oil prices, driving the NYSE Arca Airline Index up by 3.2 percent.

Oil service stocks also turned in a strong performance despite the steep drop by crude oil prices, as reflected by the 2.9 percent surge by the Philadelphia Oil Service Index.

SLB (SLB) helped lead the sector higher, spiking by 11 percent after reporting better than expected second quarter results.

Commercial real estate and housing stocks also saw considerable strength as a pullback by treasury yields eased recent interest rate concerns.

Commodity, Currency Markets

Crude oil futures are plunging $5.35 to $83.96 a barrel after tumbling $2.88 to $89.31 a barrel last Friday. Meanwhile, after climbing $20.60 to $4,070.80 an ounce in the previous session, gold futures are rising $18.20 to $4,089 an ounce.

On the currency front, the U.S. dollar is trading at 163.68 yen versus the 163.84 yen it fetched at the close of New York trading on Friday. Against the euro, the dollar is trading at $1.1380 compared to last Friday’s $1.1385.

Asia

Asian stocks advanced on Monday as oil prices tumbled amid U.S.-Iran truce hopes, helping ease inflation and interest-rate concerns ahead of crucial Fed, BoE and BoJ central bank meetings due this week.

Iran stopped conducting counterattacks and said it had made progress in talks with Oman on management of the Strait of Hormuz after the U.S. paused an almost two-week run of strikes against Iran for a second night.

With the pause in the U.S.-Iran war, Brent crude prices tumbled toward $90 a barrel. The U.S. dollar index dropped, while gold jumped more than 1 percent to trade above $4,100 an ounce.

China’s Shanghai Composite Index surged 1.2 percent to 3,858.24 as shares of CXMT, China’s biggest memory chip maker, soared nearly 500 percent on its first day on the Shanghai Stock Exchange. Hong Kong’s Hang Seng Index jumped 1 percent to 25,207.18.

Japanese markets reversed course to end higher as signs of easing Middle East tensions offset concerns over the profitability of artificial intelligence investment.

The Nikkei 225 Index closed half a percent higher at 64,931.19, while the broader Topix Index shot up 1.4 percent to 4,066.07.

Tech stocks declined, with chip-testing equipment maker Advantest falling 2 percent ahead of its earnings scheduled for Wednesday. Memory chipmaker Kioxia Holdings lost 2.6 percent ahead of its earnings results due on Friday.

Seoul stocks ended a choppy session sharply higher, led by technology stocks. The Kospi Index jumped 1 percent to 6,755.75.

Samsung Electronics rose 1.8 percent after it struck a pact with U.S. chip designer Broadcom to widen cooperation across memory chips, contract chip making and advanced packaging. Peer SK Hynix surged 3.2 percent.

Australian markets rallied after a gauge of Australia’s services sector growth hit a six-month high in July. Traders also braced for upcoming CPI inflation data for fresh insights into the Reserve Bank’s policy outlook.

The benchmark S&P/ASX 200 Index shot up 1.4 percent to 8,894, while the broader All Ordinaries Index closed up 1.4 percent at 9,063.80.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 Index ended 0.6 percent higher at 13,850.69, erasing early losses and halting the previous session’s losses.

Europe

European stocks have moved mostly higher on Monday amid easing tensions between Washington and Tehran.

Brent crude prices fell around 6 percent toward $90 a barrel after the United States and Iran paused military strikes over the weekend, paving the way for talks to avoid a return to full-scale war.

Iran said it had made progress in talks with Oman on managing the strategic Strait of Hormuz, raising hopes that the key oil route would avoid further disruption.

Investors also turned attention to crucial quarterly earnings from major U.S. technology companies and the all-important Federal Reserve policy meeting.

While the German DAX Index is up by 1.6 percent, the French CAC 40 Index is up by 0.8 percent and the U.K.’s FTSE 100 Index is up by 0.5 percent.

Automakers were broadly higher, with Volkswagen, Mercedes Benz, Volvo and Renault rising 1-2 percent after recent data showed demand for electrified cars continued to underpin growth in Europe’s auto market in June.

DCC Energy shares rose over 1 percent in London after the Irish energy distributor agreed to a £5.75 billion takeover offer from private equity firms KKR and Energy Capital Partners.

Vodafone Group shares surged 4 percent. After delivering strong first-quarter results, the telecoms major said it expects full-year earnings to be at the upper end of guidance.

Drugmaker AstraZeneca gained 1.3 percent after reporting second-quarter profit ahead of expectations and backing its annual and long-term forecasts.

Industrial conglomerate Siemens advanced 1.4 percent after adding new Nvidia AI software to its Intelligence Center X.

U.S. Economic News

New orders for U.S. manufactured durable goods rebounded by much less than expected in the month of June, according to a report released by the Commerce Department on Monday.

The Commerce Department said durable goods orders rose by 0.3 percent in June after tumbling by a revised 4.0 percent in May.

Economists had expected durable goods orders to jump by 1.7 percent compared to the 4.5 percent plunge originally reported for the previous month.

Excluding a modest decrease in orders for transportation equipment, durable goods orders climbed by 0.6 percent in June after surging by 1.8 percent in May. Ex-transportation orders were expected to increase by 0.9 percent.

At 11:30 am ET, the Treasury Department is scheduled to announce the results of this month’s auction of $69 billion worth of two-year notes.

The Treasury Department is also scheduled to announce the results of this month’s auction of $70 billion worth of five-year notes at 1 pm ET.