Stocks generally edged up, and currencies were subdued as markets anticipated Kevin Warsh's debut as Federal Reserve Chair. Oil prices remained near three-month lows, with Brent crude reaching as low as $77.75 a barrel, a decrease of over a third from April peaks, before recovering slightly to $79.29. This decline was attributed to reports that the U.S. might lift sanctions on Iranian oil as part of a deal to end the war, easing inflation concerns and pushing bond yields lower. The impending U.S.-Iran agreement, expected to be signed on Friday, added to optimism about increased Middle East exports, further contributing to lower U.S. Treasury yields and a global bond rally.
European stock markets, such as the pan-European STOXX 600, rose by 0.3%, nearing Monday's record, as falling oil prices offered a potential relief for energy-importing nations. However, shares of BMW fell 7% due to a downturn in China and the impact of the U.S.-Israeli war on Iran. On Wall Street, futures indicated a rebound in tech stocks after recent losses among U.S. chipmakers; Broadcom, Micron, AMD, and Intel saw premarket gains ranging from 1.5% to 3.5%. MSCI's broadest index of Asia-Pacific shares outside Japan increased by 0.3%, with AI-related gains in China helping to offset sagging consumer stocks.
Investors are closely watching Warsh's first Fed meeting, expecting interest rates to remain unchanged, likely within the 3.5%-3.75% range. The focus will be on his press conference, his vote, and the committee members' projections for future rate changes, with market futures now pricing in a 25-basis-point hike later in 2026. Despite a rate hike in Japan, the yen remained around 160.3 to the dollar, protected from further downside by potential official intervention, while the euro firmed slightly to about $1.16. Sweden's Riksbank, meanwhile, kept its policy rate unchanged but signaled a possible future hike.
