U.S. equity futures rose Monday after President Donald Trump canceled planned strikes against Iran, a move that triggered a sharp decline in oil prices and signaled a potential end to the fighting. Trump announced Sunday that he would order U.S. forces to refrain from the attacks and stated that a deal to end the conflict is near, with talks between the two nations scheduled to resume Monday.
Energy Markets and Equity Response
The decision to call off the strikes reversed a recent trend of escalating tensions. U.S. media reports on Friday had indicated the president was preparing a new wave of strikes as energy prices surged and hopes for a negotiated settlement diminished. Just one day prior to the cancellation, Trump had warned that the U.S. military will be hitting them very hard
and claimed he was losing faith
in negotiations.
Crude prices tumbled in response to the news. Brent oil, the international standard, fell approximately 6% to trade at $82.95 per barrel according to CNBC, while West Texas Intermediate futures shed nearly 7% to $78.93 per barrel. Other reports noted Brent crude fell $4.27, or 4.9%, to $83.66 per barrel, and U.S. benchmark crude lost $4.86, or 5.8%, to $79.81 per barrel.
U.S. markets were poised for gains at the opening bell:
- Dow Jones Industrial Average futures: Rallied 610 points (nearly 1.2%)
- S&P 500 futures: Advanced 0.6%
- Nasdaq-100 futures: Ticked up between 0.2% and 0.3%
Treasury yields also declined as inflation concerns dimmed, with the benchmark 10-year Treasury yield sliding 7 basis points to approximately 4.67%.
U.S.-Japan Currency Intervention
Simultaneously, the U.S. and Japan confirmed a joint market intervention to prop up the Japanese yen against the U.S. dollar. The U.S. Treasury purchased yen through the Federal Reserve Bank of New York, an action confirmed by Japanese Finance Minister Satsuki Katayama. Katayama stated the move was intended to counter excessive volatility and disorderly movements
of the currency in recent months.
The dollar had recently reached 40-year highs, trading near 164 yen last week. Following the official announcement of the intervention, the dollar dropped to 155.20 early Monday in Tokyo, later trading at 156.79 yen by late Monday. According to nbcnews.com, Trump described the intervention as a signal of friendship
and noted that the U.S. provided help because Japan has a weakening yen.
Analysts noted that while a weak yen boosts profits for Japanese companies with overseas operations and attracts foreign tourists, it increases the cost of essential imports like oil. Conversely, a weaker dollar may make U.S. exports more competitive.
Global Market Impact and Economic Data
International markets showed mixed reactions. In Europe, Germany’s DAX rose 1.3% to 1.5% and France’s CAC 40 added about 1.1%. However, Asia-Pacific markets were volatile. South Korea’s Kospi fell over 5% on Monday, erasing some gains from Friday when the index had recorded its best day in history with a 17.9% surge. That Friday rally was driven by Samsung Electronics and SK Hynix, both of which saw shares gain more than 25% before falling 8.8% on Monday.
Other notable Asian indices included:
- Nikkei 225 (Japan): Slid 0.9% to 63,754.90
- CSI 300 (Mainland China): Fell 0.98%
- Hang Seng (Hong Kong): Rose 0.5% to 26,009.40
- S&P/ASX 200 (Australia): Closed 0.47% higher
Investors are now focusing on a series of U.S. labor market data releases this week. According to CNBC, FactSet consensus estimates expect the U.S. economy added 87,500 nonfarm payrolls in July, an increase from 57,000 the previous month. The unemployment rate is projected to rise to 4.3% from 4.2%.
Worth a look
