News of fresh U.S. strikes on Tuesday, described by Washington as defensive, saw oil reverse some of its losses from the day before, with Brent crude rising some 3% but remaining below $100 per barrel.
Meantime, stocks were mixed, with European shares wobbly and Wall Street futures pointing higher. That came after a rally on Monday that saw European shares rise and Japan's Nikkei hit a record high.
The overall mood in markets seems to be that a deal is close, even though U.S. President Donald Trump’s addition of a proviso that regional states normalize relations with Israel added another wrinkle. Secretary of State Marco Rubio also cautioned that negotiations with Iran could “take a few days”.
Tuesday may therefore not be the booming start to the short week many had expected. U.S. consumer confidence readings for May will top the economic data slate for the day. Given that the University of Michigan’s equivalent survey is at a record low, the report will be closely watched.
Inflation updates will dominate the rest of the week, and the news is unlikely to be soothing for rates markets as gas prices remain high.
Once-dovish Federal Reserve board member Christopher Waller on Friday said he would vote with other dissenting policymakers to remove language from the Fed’s recent policy statement that pointed to an apparent “easing bias”.
And at Fed Chair Kevin Warsh’s swearing-in ceremony on Friday, Trump maintained a more equivocal line on Fed policy, saying Warsh had to do what he felt was best. Fed futures are pricing in at least one rate rise over the next year, and central banks in the euro zone and Japan are expected to hike rates as soon as next month.
