Stocks Rise, Oil Falls on US-Iran Truce Renewal Expectations

The Story

European and Asian stock markets opened higher on Friday amid cautious optimism over a potential 60-day truce renewal between the US and Iran, while oil prices slipped. Separately, French inflation accelerated to 2.8% in May, its fastest pace in two years, and Asda announced a deal to use Ocado software for home deliveries starting in early 2027.

Key Facts

• French consumer prices rose 2.8% year-on-year in May, the fastest pace since 2024, driven by a 16.8% rise in energy prices after a 14.3% rise in April.
• French consumer spending slipped at the start of Q2, and Q1 GDP was revised down to -0.1%.
• Spanish inflation in May came in at 3.6%, above the ECB’s 2% target.
• Asda will use Ocado’s software for home deliveries from early 2027, including deliveries from stores, dark stores, and third-party apps such as Uber Eats, Deliveroo, and JustEat.
• The UK’s FTSE 100 opened up 0.1%, the Stoxx Europe 600 up 0.3%, Japan’s Nikkei up 2.65%, Hong Kong’s Hang Seng up 0.9%, and South Korea’s Kospi up 3.6%.
• Brent crude fell about 1% to $93.02 a barrel, on track for a 17% monthly drop.
• The US and Iran are reportedly close to a 60-day truce renewal that would reopen the Strait of Hormuz, lift the US blockade of Iranian ports, and give Iran access to up to $12bn in frozen assets.
• US Treasury Secretary Bessent stated that Trump’s three “red lines” for a deal are for Iran to open the Strait of Hormuz, turn over its enriched uranium, and end its nuclear program. Bessent also said the US would “not tolerate any effort to impose a tolling system in the Strait of Hormuz.”
• US PCE inflation for April: headline +0.4% (expected +0.5%), core +0.2% (expected +0.3%). The probability of a Fed rate hike by December fell to 59% from 62%.
• NY Fed President Williams said monetary policy “is right where we want it to be.” St Louis Fed President Musalem acknowledged a scenario “where the economy might require a rate increase,” but said that was conditional.
• Jefferies analyst Mohit Kumar stated that a US-Iran deal could have greater impact on rates markets than equities. He expects the ECB may hike once in June, but sees no series of hikes. He maintains that the Fed and Bank of England will cut rates, with the BoE heading to 3% by mid-2027 and the Fed delivering two cuts over 12 months if oil drops below $80.
• Asian stock gains were partly supported by AI enthusiasm: TSMC +2.6%, Samsung Electronics +6%, SK Hynix +0.6%.

Conflicting Reports

No conflicting reports identified in the source article.

Still Unclear

• Whether the US-Iran truce renewal will be finalized and within what timeframe.
• Whether the ECB will raise rates in June as suggested by one analyst.
• Whether the Fed will cut rates before the US midterms, and whether oil prices will fall below $80.
• The final outcome of negotiations on Iran’s nuclear program, which are expected to last up to 60 days.

Misconceptions

No widespread misconceptions addressed in the source article.

Key Figures

• Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics
• Mohit Kumar, analyst at Jefferies
• Jim Reid, analyst at Deutsche Bank
• US Treasury Secretary Bessent
• NY Fed President Williams
• St Louis Fed President Musalem
• Andrew Bailey, Bank of England Governor (scheduled to speak)

Sources: The Guardian