EMEA Morning Briefing : Stock Futures Lower Amid Cautious Mood

MARKET WRAPS

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Germany ZEW indicator of economic sentiment; no major corporate trading updates expected

Opening Call:

European stock futures traded lower early Tuesday. Asian stock benchmarks were mixed; the dollar strengthened; Treasury yields edged lower; while oil futures and gold fell.

Equities:

Stock futures in Europe were tracking lower amid uncertainty over the full reopening of the Strait of Hormuz, a critical waterway through which one-fifth of the world's oil is typically transported.

President Trump said the strait would fully open Friday, the same day the U.S. and Iran plan to finalize a peace deal in Switzerland. However, senior U.S. officials, briefing reporters around the same time, said it could take more than two weeks to resume normal shipping operations in the strategic channel.

"While the [U.S.-Iran] agreement marks a significant diplomatic breakthrough, the [strait's] normalization process is unlikely to be immediate," said Stefan Arsenovic, founder and CEO at Eleonex.

Central bank decisions are also in focus this week. The Bank of Japan raised rates to 1.0% bringing borrowing costs to their highest level since 1995. The 7-1 decision marks the bank's first tightening move since last December.

Forex:

The dollar strengthened amid hopes of a normalization of oil trade through Hormuz, but until the U.S.-Iran deal is signed markets are likely to focus on "any potential pitfalls," Goldman Sachs analysts said. The speed with which tankers' flow can recover will also be closely watched.

The analysts note that following the 2022 energy shock, the "terms of trade pressures extended long after the peak in commodity prices." Central bank decisions due this week are unlikely to shift based on the still uncertain U.S.-Iran deal, the analysts added.

Bonds:

U.S. Treasury yields were slightly lower. The $30 trillion Treasury market could be the center of attention this week as a deal to open the Strait of Hormuz looks possible and as Kevin Warsh prepares for his first meeting as Federal Reserve Chair.

"The market is removing a bit of risk premium priced into yields," said Scott Pike, senior portfolio manager at Income Research + Management. Yet yields remain elevated, which means it costs the U.S. government, households and businesses more to borrow than before the war.

Energy:

Oil prices fell but are expected to remain supported amid uncertainty over the full reopening of the Strait of Hormuz. Eastspring Investments expects oil prices to remain above $80 a barrel even if a U.S.-Iran deal allows flows from the Middle East to normalize.

"Shipping activity could remain heavily constrained, maritime routes may still require security clearance, and energy infrastructure across the [Middle East] may take time to return to full capacity," said Stefan Arsenovic, founder and CEO at Eleonex. "As a result, the recovery in oil flows is expected to be gradual, which could limit the pace of the crude price [downward] correction to some extent," Arsenovic added.

Metals:

Gold fell early Tuesday. The improving risk sentiment across markets has likely also tempered investor expectations for further interest rate hikes, a view that could be confirmed by a series of central bank decisions this week, including from the Fed and the Bank of England, ANZ Research analysts said.

In particular, markets are closely watching the Fed, which is set to hold its first policy meeting under new chairman Kevin Warsh.

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Iron ore futures were mixed. Global iron ore shipments remain high despite lower prices recently, Nanhua Futures said. As current steel demand slows in the off season, markets have started to trade the expectation that steel mills could lower production, it said. Investors should monitor the pace of steel mills' production reduction in the near term.

TODAY'S TOP HEADLINES

Trump Says Strait of Hormuz Will Be Fully Open by Friday Under Iran Deal

GENEVA-President Trump said the Strait of Hormuz would be fully open Friday, the same day the U.S. and Iran plan to finalize a peace deal in Switzerland that ends the four-month war and kick-starts nuclear negotiations.

"The deal is already signed and the strait is already partially opened," Trump said Monday while seated alongside French President Emmanuel Macron at the start of Group of Seven talks along the southern bank of Lake Geneva. "Ships are starting to go out now, and on Friday it will be completely opened," he said, adding that there would be "free sailing."

Impact of Iran War to Persist Despite Deal Offering Hope for Peace, ECB's Nagel Says

The deal between Iran and the U.S. to end the fighting offers reason for hope, though the impact of the jump in energy prices from the war will continue to be felt, Bundesbank President Joachim Nagel said Monday.

"Fortunately, a ceasefire and the reopening of the Strait of Hormuz are now in sight. There is reason to hope for peace," Nagel said in a speech in Frankfurt. "Nevertheless, even if the Strait of Hormuz becomes navigable again soon, it will take months for the oil supply to return to normal."

After Iran Tensions, Europe Is Just Trying to Avoid a Fight at G-7

Europeans once thought they could win favor with President Trump by lavishing praise on him and pandering to his foreign-policy objectives. Those days are long gone.

As European leaders gather with Trump in person this week for the first time since the start of the Iran war, their goal will be simple: avoid a repeat of the cage match that took place on the White House lawn over the weekend.

GM in Talks to Supply Weapons Parts to Lockheed Martin

General Motors is in talks with Lockheed Martin about making parts for the defense contractor's weapons, according to people familiar with the matter.

Under the arrangement, GM would manufacture commonly used parts that could help Lockheed bolster munitions production, the people said. The companies are discussing which components GM could potentially make.

Anthropic, Trump Officials Seek Deal on Restoring Powerful Model Access

WASHINGTON-Talks between Anthropic and Trump administration officials continued Monday without a deal to resolve the security concerns that pushed the White House to restrict access to the artificial-intelligence company's latest model, increasing urgency on both sides to find a resolution.

After the Trump administration said foreign governments, companies and many individuals were prohibited from accessing the model, called Fable 5, on Friday, Anthropic shut down access for all users to comply with the new rule. It did the same for Mythos 5, a more powerful model also covered by the restrictions.

Judge Dismisses Elon Musk's xAI Trade-Secret Lawsuit Against OpenAI

A California federal judge Monday dismissed a lawsuit from Elon Musk's artificial-intelligence company xAI that accused OpenAI of trying to steal trade secrets.

Judge Rita Lin said xAI didn't prove that the rival firm had recruited a former engineer to induce him to share information about the company's Grok chatbot. Musk's AI unit had sued OpenAI last year for allegedly taking xAI's trade secrets and poaching its employees.

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Expected Major Events for Tuesday

07:00/CZE: May PPI

07:00/SVK: Apr New orders in industry

08:00/BUL: May CPI

08:00/ITA: May CPI

08:30/UK: Mar Card Spending statistics

09:00/EU: 1Q Labour Cost Index

09:05/GER: Jun ZEW Indicator of Economic Sentiment

All times in GMT. Powered by Onclusive and Dow Jones.

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

06-16-26 0015ET