(Corrects typo in paragraph five)
Written by Anna Szymanski
June 16 (Reuters) – What matters in US and global markets today
By Anna Szymanski, Managing Editor, Reuters Open Interest
The global stock rally sparked by the initial US-Iran deal appeared to have waned on Tuesday as markets awaited more details on its terms and looked for signs that it would lead to a profitable increase in tanker traffic in the Strait of Hormuz.
Attention was also focused on central banks on Tuesday as the Reserve Bank of Australia and the Bank of Japan began a busy calendar week for monetary policymakers. The BOJ raised its expected quarterly rate hike to 1%, a 31-year high.
I’ll get into that and more below.
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CENTRAL BANKS ARE DRIVING THE STAGE
Despite President Donald Trump’s comments on Monday that oil tankers were leaving the Strait of Hormuz, there were no significant tanker crossings visible in ship tracking data on Monday – although ships continued to sail off the coast of Oman under the watch of the US Navy.
Brent crude fell sharply on Tuesday, having fallen 5% on Monday, but held above $80 a barrel. Meanwhile, global stocks extended their gains as major Asian indices rose and European stocks opened higher. Wall Street futures were much lower before the bell.
It’s still early days, and Trump said on Monday that the text of the agreement would be released after his formal signing on Friday. Meanwhile, fighting between Israel and Hezbollah in Lebanon eased on Monday.
Moving to central banks, the BOJ’s expected rate hike to 1% signaled another step toward normalization of the country’s monetary policy as it seeks to reduce price pressures exacerbated by the energy shock fueled by the Iran war. Speaking on Tuesday, BOJ Deputy Governor Shinichi Uchida welcomed the US-Iran memorandum but noted uncertainty over the “pace of development” regarding oil flows.
The well-telegraphed move had little impact on the yen, which is already near 160 to the dollar. Any further weakness from here could trigger further government intervention to support the currency.
Meanwhile, the Reserve Bank of Australia kept rates unchanged at 4.35%, highlighting the faltering economy, but also warned that inflation remained too high, meaning further rate hikes are likely.
While the Federal Reserve and the Bank of England are expected to leave rates unchanged when they meet on Wednesday and Thursday, respectively, their language will be closely scrutinized as investors assess how the prospect of a decision on the Iran war could affect their benchmarks.
