MARKET WRAPS

Stocks:

European shares were mixed on Monday as fresh escalations in the U.S.-Iran conflict weighed on broader stock-market exuberance.

Tech stocks and oil majors gained , though energy-intensive stocks slipped, pushing the Stoxx 600 down.

The U.S. and Iran are discussing a memorandum of understanding that would remove blockages in the Strait of Hormuz and establish an extendable 60-day framework to address disputes over Iran's nuclear program and sanctions relief.

"The actual progress of the U.S.-Iran negotiations is unclear ," SEB said.

Oil prices climbed more than 3% after the U.S. and Iran exchanged fresh strikes over the weekend. Brent crude futures were up about 3% at nearly $94 a barrel, after registering their biggest drop in years over the month of May.

Economic insight

The inflation expectations of eurozone households steadied in April, but at a level that was much higher than before the onset of the conflict in the Middle East, likely underpinning expectations that the European Central Bank will raise its key interest rate next week.

Money markets are pricing in a 93% chance that interest rates will be increased by 25 basis points, LSEG data showed.

"The market's 90% probability for a June hike seems well founded," Societe Generale said. In case there is no major pushback on hiking rates in June, or some dovish tones in the next ECB staff forecasts or in the press conference on June 11, " markets may soon start pricing in a higher probability for a second hike in July ."

Stocks to Watch

It remains too early to assess whether a takeover of easyJet would materially alter the competitive landscape across Europe, RBC Capital Markets said.

After months of focus on the opportunities for smart glasses, EssilorLuxottica 's investor discussions have started to pivot back toward the base eyewear business, Barclays said.

U.S. Markets:

Stock futures pointed to gains for major indexes after the S&P 500 and Nasdaq composite both closed at new highs on Friday.

Investors are now closely watching developments in U.S.-Iran negotiations and upcoming jobs data for further clues on the interest-rate outlook and broader market sentiment.

Forex:

The euro traded flat.

The dollar rose after the U.S. and Iran exchanged fresh blows over the weekend, lifting oil prices and supporting safe-haven assets.

Sterling traded flat. The removal of expectations for aggressive rises in U.K. interest rates has failed to materially weaken sterling, ING said.

Bonds:

Eurozone government bond yields rose in early trade with uncertainty over a U.S.-Iran deal still looming despite apparent intentions from both sides to reach an agreement.

Treasury yields rose with more increases in the short and intermediate segments than in the long end as near-term uncertainty over the Middle East conflict continued to fuel inflationary expectations.

Markets have priced in a lot of good news and bond yields therefore have limited scope to move lower, ING said.

10-year Bunds remained a buy opportunity if the yield traded above 3%, Commerzbank said.

Energy:

Oil climbed to $93.95 a barrel after closing at its lowest level since mid-April last week. The market is once again factoring in heightened military tensions and growing uncertainty surrounding efforts to secure a deal, though gains have remained relatively contained.

Metals:

Gold prices fell more than 1% on a firmer dollar and rising crude futures.

Aluminum

Aluminum reaching $4,000/metric ton in the near term doesn't seem unreasonable given disruptions to Middle East supply, Jefferies said. Still, the bull case for aluminum depends on production not rising elsewhere in the world.

Copper

Copper rose in early Asian trade amid tight global supplies. The world's top copper producer, Chile, posted its lowest production for the month of April in 23 years, reinforcing expectations of tight global supplies, ANZ Research said.

Goldman Sachs raised its year-end copper price forecast to $13,735 a metric ton from $12,465 previously, citing a worsening supply outlook and tighter market balances outside the U.S.

Iron

Iron ore was lower in early Asian trading. Prices are facing some pressure from ample supply, according to Nanhua Futures.

EMEA HEADLINES

U.S. Strikes Iranian Air Defenses, Drone Site in New Hormuz Skirmish

DUBAI-The U.S. and Iran exchanged fresh blows over the weekend, with the U.S. striking what it said were air-defense radar and drone sites and Kuwait coming under attack after Iran said it was retaliating.

The exchange of fire came as the two foes were working to hammer out a deal to wind down the fighting. President Trump indicated a deal was close ahead of the weekend, but mediators have said issues like nuclear commitments and the timing and scale of any financial relief remained unresolved.

Eurozone Household Inflation Expectations Steady, But at High Level

The inflation expectations of eurozone households steadied in April, but at a level that was much higher than before the onset of the conflict in the Middle East, likely underpinning expectations that the European Central Bank will raise its key interest rate next week.

According to a survey of 19,000 adults conducted between April 2 and May 4, consumer prices are expected to rise by 4% over the next 12 months, unchanged from March. The survey found that household expectations of inflation three years from now eased slightly.

Castlelake Says Any easyJet Offer Would Value Airline at Minimum $4.12 Billion

Asset-based lender Castlelake said that any potential offer for easyJet would value the U.K. budget airline at a minimum of 3.06 billion pounds ($4.12 billion).

Minneapolis-based Castlelake, which owns 2.14% of easyJet, said late Friday that it was considering an offer. Any proposal it makes wouldn't be less than 403.23 pence a share, it said Monday.

USA Rare Earth Plans Roughly $200 Million Investment in France

USA Rare Earth said additional investments in France could total more than 175 million euros ($204.1 million) through 2030 as it expands its metal, alloy and magnet making operations in the country.

The U.S. company said Monday that the planned investment aligns with agreements with the U.S. Commerce Department. The U.S. has made securing supplies of rare earths and processing facilities a priority in a push reduce its reliance on China.

GLOBAL NEWS

China Steps Up Restrictions Over Outbound Investments

China is tightening scrutiny of outbound capital flows after forcing the unwinding of the Meta-Manus deal, as authorities seek to safeguard the economy amid heightened technology rivalry with the U.S.

The State Council, China's cabinet, said Monday that the government will prohibit the unauthorized export or use of state-restricted goods, technology, services and data, according to rules approved in April.

SpaceX's IPO Could Test the Stock Market Rally

U.S. stocks are set to face their biggest test since the U.S. war with Iran this month, as the long-awaited listing of Elon Musk's SpaceX hits markets just as momentum from the first quarter earnings season is starting to fade and investors are growing concerned over rising inflation pressures in the world's biggest economy.

SpaceX, the first of three mega IPOs expected before the end of the year, is set to begin trading on the Nasdaq on June 12, with an expected valuation of as much as $2 trillion. The group will raise around $86.5 billion from the sale, making it the biggest U.S. listing on record.

China PMI Signals Manufacturing Held Up While Cost Pressures Rose

A private gauge of China's manufacturing activity showed continued growth in May, but at a softer pace as the Middle East conflict kept cost pressures high and supply chains strained.

Like other Asian economies, manufacturers in China are feeling the sting from higher prices of raw materials and energy stemming from the Iran crisis, but output remained relatively resilient as the tensions stretched into its fourth month.

Israel Captures Crusader Castle as It Expands Invasion of Lebanon

Israel expanded its military invasion of Lebanon, moving deeper into the country and capturing the strategic high ground of a historic Crusader castle it hadn't held for a quarter of a century, as it hit back at Hezbollah following drone attacks that have killed its soldiers and sent Israeli residents running to shelters.

The escalation is piling more pressure on Lebanon's fragile government and complicating negotiations between the U.S. and Iran, which has made an end to fighting on that front one of its conditions for a deal. But Israeli Prime Minister Benjamin Netanyahu has come under heavy pressure from critics who say he has allowed the U.S. to tie his hands in fighting the militant group.

Right-Wing Firebrand Surges Into Colombia Runoff, Shaking Political Establishment

BOGOTÁ, Colombia-A far-right lawyer who pledged to smash the cocaine-fueled armed groups that have expanded in this country took the most votes in Sunday's first round of the presidential election, a blow to both the ruling leftist party and establishment conservatives.

With 99% of voting stations reporting, Abelardo de la Espriella took in 10.3 million ballots, or 44% of the vote, to 41% for Ivan Cepeda, a far-left candidate supported by President Gustavo Petro. Most polls in Colombia, a close ally of the U.S. in the war on drugs, had shown that Cepeda, the 63-year-old son of a slain Marxist senator, would comfortably beat de la Espriella and 10 other candidates.

Trump Wants Minerals, Health Data for Aid. African Nations Are Pushing Back.

A handful of African nations are rejecting American health aid, outraged by the Trump administration's demands for access to private health records and even minerals in exchange for lifesaving medicine.

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06-01-26 0517ET