European shares and major Wall Street indexes were lower yesterday, with markets focused on the outlook for Federal Reserve interest rates and on a potential deal between the US and Iran to reopen the Strait of Hormuz.
Oil prices jumped after Iran insisted that the United States must satisfy several demands before the Strait can reopen.
On Wall Street, the Dow Jones Industrial Average fell 0.12 per cent to 53,974.62 and the Nasdaq Composite lost 0.17pc to 26,645.08. The S&P 500 bucked the trend, edging 0.02pc higher at 7,759.27.
US stocks had hit a record high on Friday after a weaker-than-expected jobs report caused traders to cut their bets on Fed rate hikes.
The pan-European STOXX 600 index fell 0.16pc yesterday, and Europe’s broad FTSEurofirst 300 index dropped 0.14pc.
The MSCI index of global stocks clung to gains, up 0.05pc.
Iran said on Sunday that a deal with Oman about transit through the Strait of Hormuz was in its final stages, but reiterated that the waterway would only reopen once the United States met other conditions. Those include compensation and an end to sanctions and military threats.
Brent crude futures rallied 3.06pc to $86.11 per barrel, and U.S. crude jumped 3.26pc to $80.73. Global benchmark prices still remained well below late April’s peak of more than $126 a barrel.
The key event for markets this week is the US inflation reading for July tomorrow, which will impact Fed officials’ thinking on rates. Investors will also be watching euro zone employment data and US consumer price figures for clues on the interest rate outlook.
Economists polled by Reuters expect the consumer price index to have risen 3.4pc year-on-year in data tomorrow, compared with 3.5pc the previous month.
“We are keeping our view of no hikes from the Fed for this year,” said Mohit Kumar, a senior European economist at Jefferies, noting this week’s inflation report is key.
“If oil prices remain contained and move lower from the current levels, that would prevent the need for the Fed to hike rates,” Kumar said.
Asian shares rose overnight, with MSCI’s broadest index of Asia-Pacific shares outside Japan closing up 0.61pc at 1,628.74.
Emerging market stocks rose 0.66pc to 1,668.75.
Stock markets around the world have hit record highs in recent weeks, boosted by strong corporate earnings.
Analysts at BofA said that with nearly 90pc of S&P 500 results in, earnings per share were up 30pc on the year after excluding investment gains at Alphabet and Amazon. A 76pc EPS beat rate matched the strongest level since 2021.
Strategists at JPMorgan revised up their 2026 EPS estimate to $365, marking annual growth of 35pc, and lifted their S&P 500 price target to 8,000 from 7,800. It is currently at 7,758.
Earnings are lighter this week, but include semiconductor company Applied Materials, networking equipment maker Cisco and cloud infrastructure technology company CoreWeave.
The yield on benchmark U.S. 10-year notes rose 3.03 basis points to 4.688pc, with the market bracing for $125 billion in new issuance this week.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.15pc to 99.79, with the euro down 0.11pc at $1.1545.
The Japanese yen weakened 0.75pc to 158.97 per dollar, though investors were still wary of intervention.
Bank of Japan policymakers warned of mounting inflation risks that could require a faster-than-expected pace of interest rate increases, a summary of opinions at their July meeting showed, boosting the case for a September hike.
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