Asian share markets experienced a rally on Monday, June 22nd, as negotiators from Iran indicated progress in peace talks with the United States. This helped alleviate concerns that the process was faltering. Officials from Qatar and Pakistan also confirmed that the initial session of talks concluded with progress on a roadmap for a final deal within 60 days. Japan's Nikkei 225 jumped 1.9%, adding to an almost 8% gain last week and reaching all-time highs, driven by AI stocks. South Korea's Kospi also saw significant gains, rising 2.6% to a new record, largely due to demand for semiconductor stocks. MSCI's broadest index of Asia-Pacific shares outside Japan gained 1%, while Chinese blue chips remained flat. However, US markets presented a mixed picture, with the S&P 500 falling 0.4% and the Nasdaq Composite slumping 1.3%, mainly due to falling Big Tech stocks like Alphabet (down 5%), Amazon (down 4.7%), and Broadcom (down 4.5%). The Dow Jones Industrial Average, however, added 0.3% (148 points).
Oil prices eased following the progress in US-Iran talks. Brent crude futures shed early gains, falling 0.4% to $80.17 a barrel, a significant drop from its May peak of $126.41. US crude remained 1.2% firmer at $77.52 a barrel. Later reports indicated Brent crude settling lower by 3.38% to $77.90 a barrel, and US crude oil falling 2.6% to $73.86 per barrel. This decline was further influenced by the US Treasury Department authorizing Iranian sales of crude oil and petrochemical products through August 21st, easing sanctions as part of the push for a peace deal.
Despite the optimism from the peace talks, concerns over looming interest rate hikes by the Federal Reserve put pressure on bond markets and global stocks. The Fed's hawkish stance from the previous week led markets to price in a 75% chance of a rate hike as early as September, with futures implying 38 basis points of tightening by year-end. Yields on two-year notes rose by as much as four basis points to 4.2276%, their highest since early 2025. The Fed's favored gauge of core inflation, due on Thursday, is forecast to rise to 3.4% in May, further fueling expectations of tighter policy. Analysts noted that the market was somewhat surprised by the new Fed Chair's action, expecting a more accommodative stance.
The hawkish outlook from the Fed strengthened the US dollar, which stood at 161.48 yen, with the threat of Japanese intervention preventing it from testing resistance at 161.96. The euro eased to $1.1464, after hitting a three-month low, and sterling declined 0.2% to $1.3210 due to political uncertainty. In commodity markets, gold bounced 1.1% to $4,205 an ounce, benefiting from the news of progress in peace talks.
