US Futures Rise Amid FOMO Panic With S&P Set For New All Time High

June 25, 2025

US equity futures reverse modest losses and trade flat, just shy of a new record, after the Nasdaq set a new all time high yesterday as the ceasefire between Iran and Israel remains intact (Pentagon intelligence report said US airstrikes had only a limited impact on Iran’s nuclear program, which President Trump disputed) and as the NATO Summit continues. As of 8:00am ET, S&P futures were up 0.1% ahead of Powell’s second day of Congressional testimony; Nasdaq 100 futures rose 0.3% as a FOMO panic grows now that the index is back at all time highs. Pre-market Mag7/Semis are seeing a bid; with cyclicals mixed with financial higher but Industrials are dragged by FDX which is down 6% post earnings (q1 guide below cons/withheld full year guidance citing trade policy uncertainty). Asia closed higher (Shanghai +1.04%/Hang Seng +1.23%/Nikkei +39bps) on limited catalysts outside of comments from China’s Premier Li that Beijing was turning China into a “mega-sized” consumer powerhouse, while Europe is lower (FTSE -5bps/DAX -40bps/CAC -20bps) on light volumes (-20% vs 10dma). The US dollar is stronger, while commodities are weaker with Energy seeing a relief rally/deadcat bounce. As the market moves back to trade, taxes, and earnings there are incrementally positive headlines on US/Mexico looking at a lowering effective tariffs rates around a quota system and US/China where China is looking to reduce the flow of fentanyl precursors, a potential goodwill measure. Today brings a second day of testimony from Powell in front of the Senate (should be same message that the Fed is well positioned to wait for further clarity on the economy), the 5Y bond auction, and new home sales.

In premarket trading, Mag 7 stocks are higher alongside index futures (Nvidia +0.8%, Tesla +0.8%, Alphabet +0.6%, Apple +0.4%, Amazon +0.3%, Microsoft +0.3%, Meta +0.2%). Here are some other notable premarket movers:

Coinbase Global Inc. shares (COIN) are up 3.3% after Bernstein raised the target on it to $510, a Street high and 48% above Tuesday’s close.
Duolingo Inc. shares (DUOL) are up 0.8% after Argus Research started coverage on the language-learning software company with a buy rating and $575 price target.
FedEx shares (FDX) fall 5.7% after its first-quarter profit forecast missed analysts’ estimates and the parcel company said it wasn’t providing a profit outlook for the fiscal year due to uncertain global demand.
Graphic Packaging (GPK) slips 1% as BNP Paribas Exane downgrades the stock amid lackluster demand in the paper and packaging sector.
Nvidia (NVDA) rises 0.9% after its price target was lifted to a Street high of $250 from $175 at Loop Capital Markets, which says the chipmaker is positioned favorably into the next “golden wave” of Gen AI adoption.
QXO Inc. shares (QXO) drop 6.3% as the building products distributor seeks to raise $2 billion in a share sale. The firm led by billionaire Brad Jacobs is pursuing a takeover.
Reddit shares (RDDT) are up 3.5% in premarket trading, suggesting the social-media company would extend a recent advance.
TMC The Metals Co. shares (TMC) jump 4.1% after Wedbush analyst Daniel Ives raised the recommendation on the company to outperform from neutral, citing US President Donald Trump’s April executive order favoring deep-sea mining.
Yum! Brands Inc. shares (YUM) are up 1.5% after JPMorgan upgraded the operator of such chains as KFC and Taco Bell to overweight from neutral.

With the S&P 500 trading within 1% of its all-time high after a sharp rebound from April’s tariff-driven turmoil, some analysts warn that complacency is setting in. Risks remain elevated, including the potential for renewed geopolitical tensions and the looming tariff deadline set by US President Donald Trump, now just two weeks away, with little progress on trade deals.

“Going into July 9, there is no tariff fear priced into the market,” Bhanu Baweja, chief strategist at UBS Group AG, told Bloomberg TV. “Caution is what is warranted right now. We won’t be chasing the market higher.”

Following a turbulent stretch in financial markets that was sparked by a near two-week war between Israel and Iran, traders are shifting their focus back to the US economy and how trade risks and fiscal pressures could affect corporate earnings and growth. A fragile ceasefire between Israel and Iran appeared to be holding on Wednesday, with both sides claiming victory in the war.

“The market is moving on to the next thing which is the tariffs deadline, and central banks,” said Lilian Chovin, head of asset allocation at Coutts. “We are in a sequence where slightly weaker growth momentum is being positively received by markets, because it’s causing renewed expectations for rate cuts.”

European stocks are little changed with gains in auto and technology shares offset by losses in media and telecommunications. The Stoxx 600 was little changed as auto shares outperformed, as data showed new-car registrations rose 1.9% last month from a year earlier. Media stocks were the biggest laggards. Here are some of the biggest movers on Wednesday:

Stellantis rises as much as 5.4% as Jefferies upgrades the automaker to buy from hold, writing in a note that operations may be starting to take a more positive turn.
Ambu shares rise as much as 5.5% after the US Food and Drug Administration alerted health-care providers about importing certain medical devices manufactured in Japan by a unit of Olympus.
Babcock climbs as much as 14% after the support services company upgraded its medium-term guidance for underlying operating margin, with CEO David Lockwood saying this is “a new era for defense.”
European-listed renewable energy stocks gained after a Republican Senator said US lawmakers were discussing changes to a provision in President Donald Trump’s broad spending bill that would abruptly end tax credits for clean energy companies.
THG shares jump as much as 18% after the online retailer provided a trading update and reiterated its full-year guidance ahead of its annual general meeting today.
Befesa rises as much as 12% following an upgrade to overweight from equal-weight at Morgan Stanley, which says there is growing confidence in the German recycling company’s earnings delivery.
Worldline shares fall as much as 25%, the most since October and to the lowest on record, after Dutch media outlet NRC reports that the company has covered up fraud by customers despite warnings from the firm’s risk department.
Swatch shares drop as much as 2.9% after JPMorgan cut the stock’s price target to a street low, reflecting Swiss watch export data, the latest industry trends and forex moves.
Kongsberg shares drop as much as 4.2% as Pareto Securities lowers its recommendation on the Norwegian firm to sell, saying the non-defense operations’ valuation is too high.
Universal Music falls as much as 3.4% as UBS cuts its recommendation to neutral from buy, saying the current valuation reflects strong growth potential.
BIC drops as much as 7.5%, hitting its lowest level since April 2022, after some investors offered shares in the office supplies firm at a discount to Tuesday’s closing price.
Deutsche Post falls as much as 2.2% after US delivery firm FedEx forecast worse-than-expected profit for the current quarter in a sign that soft parcel demand and uncertainty over global trade are unlikely to abate in the near term.

Earlier in the session, Asian stocks climbed on optimism the Israel-Iran ceasefire will hold, while tech shares got a boost after the Nasdaq 100 hit a record high. The MSCI Asia Pacific Index rose as much as 0.6% on Wednesday, adding to the previous session’s 2.3% rally. TSMC, Alibaba and Nintendo were among the biggest boosts. Benchmarks in China, Hong Kong and Taiwan led gains in the region. Global risk sentiment is on the mend as Middle East tensions subside, though prospects for lasting peace remain unclear. The relief rally helped propel tech stocks in particular, with investors also hopeful the the US will seal trade deals with major trading partners.

In FX, the Bloomberg Dollar Spot Index rises 0.2%. The Kiwi dollar tops the G-10 FX pile rising 0.2% against the greenback. The yen led G10 losses with USD/JPY as much as 0.5% higher to 145.68; other G10 currencies traded in a narrow range

In rates, treasuries are little changed after the benchmark 10-year yield shed five basis points Tuesday, as Powell’s comments before House lawmakers and weak consumer data boosted bets on the pace of rate cuts in 2025. US 10-year is around 4.30% with German counterpart lagging by around 1bp; UK 2- and 5-year yields trade about 1.5bp richer on the day, outperforming Treasuries. Swap traders are currently pricing in a 15% probability of a quarter-point cut next month, with expectations for at least two reductions by year-end. Powell is due to appear in the Senate on Wednesday. French bonds outperform. $70 billion 5-year note auction follows good result for Tuesday’s 2-year new issue; WI 5-year yield near 3.878% is ~19bp richer than last month’s; cycle concludes Thursday with $44 billion 7-year

In commodities, brent crude futures rise almost 1% to $67.74 a barrel before reversing some of their gains, after plunging the most since 2022 in the past 48 hours, as Trump expressed support for NATO and disputed an intelligence report that found the airstrikes he ordered on Iran had only a limited impact on its nuclear program. Spot gold hovers around $3,322/oz. Bitcoin rises 0.8% toward $107,000.

Looking at today’s calendar, US economic data slate includes May new home sales at 10am. Fed speakers include Goolsbee (8am); Powell testifies before a Senate committee at 10am.

Market Snapshot

S&P 500 mini little changed
Nasdaq 100 mini +0.1%
Russell 2000 mini little changed
Stoxx Europe 600 little changed
DAX -0.1%
CAC 40 little changed
10-year Treasury yield -1 basis point at 4.29%
VIX -0.2 points at 17.24
Bloomberg Dollar Index +0.2% at 1203.54
euro -0.1% at $1.1597
WTI crude +0.9% at $64.94/barrel

Top Overnight news

Mamdani on verge of winning New York City’s Democratic mayoral contest after Cuomo concedes: RTRS
US President Donald Trump disputed an intelligence report that found the airstrikes he ordered on Iran had only a limited impact on its nuclear program, even though the assessment came from the Pentagon: BBG
Trump tells Congress that Iran had nuclear weapons program, contradicting US spy agencies: RTRS
Trump on Tuesday appeared to undermine years of US sanctions on Iran, giving its biggest customer China the green light to carry on buying its oil as he seeks to bolster a ceasefire with Israel: BBG
With defence spending set to rise, Trump reassures NATO allies: RTRS
Fed Chair Jerome Powell had plenty of opportunities Tuesday to tell lawmakers definitively the central bank will cut interest rates soon. He didn’t take any of them: BBG
The European Union plans to impose retaliatory tariffs on US imports, including on Boeing Co. aircraft, if Trump puts a baseline levy on the bloc’s goods as many expect: BBG
Trump expressed support for NATO, praising its moves to bolster defense spending as the pact’s leaders look to secure a US commitment to the alliance: BBG
Tesla’s European sales slump for fifth month: RTRS
Big Balls, a key member of Musk’s DOGE team, resigned from government: NYT
Several Senate committees expect the updated reconciliation text as soon as Wednesday morning to reflect modifications based on initial parliamentarian rulings: Punchbowl
Morgan Stanley expects the Federal Reserve to begin cutting rates in March 2026, sees a total of seven cuts in 2026, bringing the terminal rate to 2.5-2.75%
New York Independent System Operator said it had issued an energy warning for June 24 due to a decline in operating reserves, according to Reuters. The grid was operating normally at the time, but emergency operations might be initiated to maintain system reliability.
A US judge blocked the Trump administration from withholding funds awarded to 14 states for EV charger infrastructure, according to a court filing.

Trade/Tariffs

Fox’s Gasparino posted that Team Trump said it was close to announcing a handful of trade deals. The major ones the White House claimed progress on involved Japan, South Korea, and Vietnam. India was not on the list of pending agreements amid the recent spat with Pakistan.
Vietnam expects “good results” from talks with the US in less than two weeks, according to Bloomberg.
Switzerland expects US tariffs to stay at 10% after July 9 during talks, via Bloomberg.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded stronger following the firm lead from Wall Street, with gains capped as traders were cautious amid the fragility of the Israel-Iran ceasefire. From a central bank perspective, some attention in US hours was on Fed Chair Powell, who echoed his wait-and-see stance but left July options open during the Q&A. Thereafter, sentiment in APAC trade was somewhat capped after BoJ taper-dissenter Tamura struck a hawkish tone, suggesting the BoJ may need to raise rates decisively—even amid high uncertainty—if upward price risks heighten. He also noted that he does not see 0.5% as a barrier for BoJ rate hikes. ASX 200 fluctuated between modest gains and losses before a sub-forecast Aussie Monthly CPI print provided a mild boost. The monthly gauge came in at 2.1%, towards the bottom end of the RBA’s 2–3% target range, though market pricing barely shifted. Nikkei 225 saw choppy trade in limited ranges following commentary from BoJ’s Tamura, who said he does not see 0.5% as a ceiling for rate hikes. On the trade front, FBN’s Gasparino suggested progress in US-Japan trade talks. The BoJ Summary of Opinions noted that the effects of tariff policies are likely yet to materialise. Hang Seng and Shanghai Comp conformed to the broader tone following a muted open as traders awaited the next catalyst. The indices saw upticks following remarks from China’s Premier Li who said judging from key indicators, China’s economy showed a steady improvement in Q2, and he is confident in China’s ability to maintain a relatively rapid growth.

Top Asian News

China’s Premier Li said that key indicators pointed to steady improvement in Q2, and expressed confidence in maintaining a relatively rapid growth rate. He added that regardless of global developments, China’s economy had consistently shown strong growth momentum.
Chinese Premier Li said the world economy and international economic and trade cooperation once again faces new difficulties and challenges, according to remarks at the World Economic Forum in Tianjin. He added that the risk of fragmentation in global industrial supply chains is on the rise.
Chinese President Xi Jinping is reportedly not attending next week’s BRICS summit, marking his first-ever absence, due to a scheduling conflict, according to SCMP sources.
PBoC injected 365.3bln via 7-day reverse repos with the rate maintained at 1.40%.
CBA now anticipates RBA to cut rate in July (prev. August), following the softer-than-expected Australian CPI data.
BYD (002594 CH/BYDDY) has started to cut vehicle production by at least a third of capacity in some factories in China by cancelling night shifts, suspended plans to set up new production lines, according to Reuters sources.
Japanese government will consider cutting this year’s growth forecast, according to Reuters citing sources. Japan’s government may cut its 2025 GDP growth forecast from 1.2% to below 1%, with final projections due by end-July, due to uncertainty over US tariff developments.

European bourses (STOXX 600 U/C) opened mostly and modestly firmer and have traded choppily throughout the morning. More recently, some selling pressure has been seen taking a few indices modestly into the red. European sectors hold a positive bias, and aside from the top performer, the breadth of the market is fairly narrow. Autos is the clear outperformer today, lifted by strength in Stellantis (+4.5%) after the Co. received an upgrade at Jefferies. Telecoms is found at the foot of the pile, joined closely by Food Beverage & Tobacco; though losses which are modest by nature.

Top European News

UK is to reportedly purchase twelve F-35A fighter jets, with an announcement from the UK PM potentially on Wednesday, according to The Telegraph. Unlike the F-35B jets the UK currently possesses, the F-35A variant can carry nuclear weapons.
Spain’s Economy Minister says when NATO’s military capabilities are reviewed, Spain could revise its own military spending.

DXY is a touch higher following Tuesday’s selling pressure which was triggered by an easing in geopolitical tensions and comments by Fed Chair Powell. On the former, ING believes that “the negative impact of the reduced geopolitical risk on the dollar has largely played out”. Today’s calendar is light in terms of data. However, investors are still mindful of the trade front after FBN’s Gasparino revealed last night that Team Trump said it was close to announcing a handful of trade deals. On the fiscal front, US Treasury Secretary Bessent said the Senate is on track for a vote on Trump’s tax bill on Friday. As we head closer to month-end, modelling from Barclays and Citi suggests modest USD selling. DXY is currently contained within Tuesday’s 97.70-98.27 range.
After hitting a multi-year high on Tuesday at 1.1641, the rally in EUR/USD has paused for breath with the pair returning to a 1.15 handle. Fresh macro drivers for the Eurozone are on the light side following a raft of ECB speak at the start of the week, which suggested that recent geopolitically-driven gains in the energy space are not affecting the Bank’s outlook for inflation. EUR/USD has ventured as low as 1.1591 but is holding above Tuesday’s trough at 1.1574.
JPY is seeing some give back vs. the USD following a strong session of gains, which brought the pair down from a 146.17 peak to a 144.51 trough. Overnight, we initially saw downside in USD/JPY following hawkish remarks from BoJ taper-dissenter Tamura, who reiterated that 0.5% is not a barrier for BoJ rate hike. The currency was also underpinned after FBN’s Gasparino flagged progress between the US and Japan on trade talks. However, these moves were reversed in early European trade as the USD looked to claw back some of its recent losses.
GBP is flat/lower vs. the USD with incremental macro drivers from the UK lacking. On today’s docket, we have been awaiting comments from Lombardelli and Pill. Greene and Lombardelli (again) are due to speak later.
Antipodeans are marginally outperforming amid the recent upside in global equities and a broader rise in commodity prices. AUD/USD saw an immediate knee-jerk lower on the sub-forecast monthly CPI metric, which ultimately did little to change the current course of the RBA; a July cut is still priced at 92%.
Citi month-end FX modelling: moderate USD selling at the end of June. Average signal is 0.7 historical standard deviations. The signal is weaker in GBP/USD, due to Gilts and UK equity outperformance vs European markets.
Barclays month-end FX modelling: moderate USD-selling signal by month-end against most majors, with a weak sign on EURUSD. Quarter-end rebalancing model: indicates a strong USD-selling signal against most majors, with a weak sign on EURUSD and a moderate sign on USDJPY. Overall, the signal shows moderate dollar-selling at the end of June
PBoC sets USD/CNY mid-point at 7.1668 vs exp. 7.1709 (prev. 7.1656)

Fixed Income

JGBs were initially bid, catching up to some of the gains seen in peers on Tuesday. However, the move was capped by BoJ remarks and the SOO.
USTs are essentially flat, but still remain at elevated levels following Fed Chair Powell’s commentary in the prior session, where he said “many paths are possible” when questioned on a July cut. Do note that the Fed Chair is due to speak later today also. Elsewhere, data docket is fairly light so focus will be on the 5yr auction, which follows a robust 2yr outing on Tuesday. USTs are currently just off the upper-end of a 111-17+ to 111-23+ band and 1+ ticks above Tuesday’s best.
A firmer start to the day. Bunds were the upper-end of a 130.61 to 131.12 band, after being relatively contained in APAC trade around that low, a bid emerged in the European morning as the region’s risk tone deteriorated. Thereafter, Bunds were pressured for the remainder of the morning, with downside exacerbated by the poor Gilt auction; currently trade towards session lows at 130.65;
OATs outperforming Bunds a touch with focus on French politics. The Socialist Party (PS) on Tuesday announced that the government’s “unfulfilled commitments on pensions” and other issues mean that they will have to file a motion of censure against PM Bayrou’s government. While the motion will be put forward by the left, those on the right and particularly National Rally (RN) have cautioned that they could oppose Bayrou given points of disagreement on other issues; together, PS, RN and their allies could bring Bayrou’s government down.
Gilts are trading in-line with USTs at first. Spent the morning at the upper-end of a 93.33-57 band. Specifics for the UK are very light, no commentary from BoE’s Lombardelli or Pill while supply was robust on the main metrics but saw a particularly chunky 10bps price tail. Results that pushed Gilts back to the above trough and into the red.
UK sells GBP 3.25bln 4.375% 2040 Gilt: b/c 2.88x (prev. 2.58x), tail 1.0bps (prev. 0.9bps), average yield 4.850% (prev. 4.917%).
Italy sells EUR 3.0bln vs exp. EUR 2.5-3.0bln 2.10% 2027 BTP & EUR vs exp. EUR 2.5-3.0bln 1.10% 2031 BTPei.

Commodities

Crude futures are firmer today, calmly attempting to pare back some of the recent losses, with overnight newsflow relatively light aside from private inventory data, which printed a larger-than-expected draw. WTI and Brent are trading on USD 65/bbl and 66/bbl handles respectively, back above their 50DMAs.
Spot gold is cautiously attempting to rebound from recent losses sparked by the improved geopolitical backdrop. The haven traded above the USD 3,300/oz mark for the entirety of the APAC session, and now approaches session highs, after support around the USD 3,326/oz mark.
Copper futures trade with modest gains, 3M LME contracts trading on either side of USD 9,700/t mark.
Israel’s NewMed says Leviathan field is to resume activity.
Private Inventories: Crude -4.28mln (exp. -0.8mln), Distillate -1.03mln (exp. +0.4mln), Gasoline +0.75mln (exp. +0.4mln), Cushing -0.08mln.

Central Banks

Fed’s Schmid (2025 voter) said the central bank has time to study the effects of tariffs on inflation before making any rate decisions. He noted that both employment and inflation are near the Fed’s goals. Contacts indicated that tariffs would raise prices and weigh on economic activity. He added that the economy’s resilience meant the Fed could afford to wait and observe developments before proceeding with rate cuts.
BoJ June meeting Summary of Opinions stated that, while much of the hard data for April and May had been relatively solid, it was likely that the effects of tariff policies had yet to materialise. Although uncertainty regarding trade policies remained extremely high, on the domestic front, wage developments had been solid and the CPI had been slightly higher than expected. Japan’s economy was at a crossroads between making a transition to a “growth-oriented economy driven by wage increases and investment” and falling into stagflation. Although the direct impact of US tariff policy has not been observed so far, Japan’s economy has been somewhat stagnant. Despite the impact of US tariff policy, many firms would likely continue to raise wages to address labour shortages and make high levels of business fixed investment. While the impact of the US tariff policy would certainly exert downward pressure on firms’ sentiment, the Bank needed to take some time to examine the magnitude of the impact on the real economy. Given high uncertainty, the Bank should at this point maintain accommodative financial conditions with the current interest rate level and thereby firmly support the economy. Even though prices had been somewhat higher than expected, it was appropriate for the Bank to maintain current policy given downside risks stemming from US tariff policy and the situation in the Middle East. Although the CPI had been higher than expected, the pass-through of higher wages to services prices seemed to have plateaued. The situation of government bond markets around the world had been a major topic of discussion, such as at international meetings, and attention was warranted on the possibility that developments overseas would spread to Japan. Increased volatility in the super-long-term zone might spill over to the entire yield curve, thereby spreading unintended tightening effects to the market as a whole.
BoJ board member Tamura said that if upward price risks heightened, the BoJ could face a situation where it would need to raise rates decisively, even if uncertainty remained high, adding that he does not see 0.5% as a barrier for BoJ rate hikes. He stressed the need to steadily normalise the balance sheet, even though it may take time, and noted he had voted against the June decision to slow the pace of bond-buying taper next year, arguing the BoJ should normalise bond holdings as soon as possible. Tamura stated that while the JGB market function had improved somewhat, it still remained low. He reiterated his stance that rate hikes must be timely and appropriate, neither too quick nor too late. On the economy, he assessed that inflation was on track or somewhat stronger than expected, with upward risks having been elevated until March. He flagged that market-based services inflation was exceeding 2%, and both rent and public service costs were rising gradually. He noted the rise in fresh food prices could no longer be described as temporary and must be monitored carefully. Medium- and long-term inflation expectations were gradually heightening, with household and corporate expectations already around 2%. He warned of the risk that Japan’s inflation expectations could overshoot further. Tamura also said US tariffs would likely weigh on Japan’s economy and prices, but projected inflation would remain near 2% until fiscal 2027. Despite some downside risks, he assessed that the probability of Japan reverting to a low wage/price growth environment was low. Consumer inflation data for April and May had overshot expectations, and wage momentum in Japan was sufficiently strengthening.

Geopolitics

US Secretary of State Rubio says US President Trump will buck Europe’s pleas to ratchet up sanctions on Russia, adding that the US still wants room to negotiate a peace deal, according to Politico.
US President Trump says NATO will be very strong, when asked about article 5, says “we are with them all of the way”. Thinks the Iran-Israel ceasefire is good. Last thing Iran want to do is enrich (uranium), they want to recover. Thinks US will have a relationship with Iran. Asked if the US would strike Iran again if the nuclear programme is rebuilt, says “sure” Progress is being made on Gaza.
“Al-Akhbar reported this morning from its sources that Houthi attacks in Yemen against Israel are expected to intensify and escalate in the coming days in response to the Israeli escalation in Gaza”, via Kan’s Kais on X.
Iranian Parliament approves bill to suspend cooperation with UN nuclear watchdog, according to Nournews
“There have been no [US] sanctions lifted on Iran,” said Fox Business’ Lawrence, in reference to President Trump’s post suggesting China could continue to buy oil from Iran. A senior White House official added: “The President was simply calling attention to the fact that because of his decisive actions to obliterate Iran’s nuclear facilities and broker a ceasefire between Israel and Iran, the Strait of Hormuz will not be impacted, which would have been devastating for China. The President continues to call on China and all countries to import our state-of-the-art oil rather than import Iranian oil in violation of US sanctions.”
Iranian Foreign Minister Araqchi said the nuclear programme continues, according to Al Arabiya.
White House Middle East envoy Witkoff said the US and Israel had achieved their goals in Iran, according to Fox News. He described talks with Iran as encouraging and stated it was time to sit with Iran and make a comprehensive deal.
Iran’s Revolutionary Guards denied there was any drone attack in the northwestern city of Tabriz following reports air defences were activated in the area, according to Iranian news sites.
Israel’s representative to the UN Security Council stated that Iran had been involved in producing a nuclear bomb, according to Sky News Arabia.
Israel’s representative to the United Nations said that diplomatic talks with Iran will take place soon, according to Al Arabiya.
US is set to open its embassy in Jerusalem on June 25th, following the ceasefire between Israel and Iran and the lifting of all restrictions by Israel’s Home Front Command, according to a statement.
Iran executed three men for allegedly working for Israel’s spy agency Mossad, according to the Mizan News Agency.

US Event Calendar

7:00 am: Jun 20 MBA Mortgage Applications 1.1%, prior -2.6%
10:00 am: May New Home Sales, est. 693k, prior 743k
10:00 am: May New Home Sales MoM, est. -6.73%, prior 10.9%

Central Banks

8:00 am: Fed’s Goolsbee Appears on Podcast
10:00 am: Fed’s Powell Testifies Before Senate Committee

DB’s Jim Reid concludes the overnight wrap

When we first published the report in 2012, US cities were a bit of a bargain relative to their developed market peers. But fast forward a decade or so and the US is now jostling with Geneva and Zurich at the top of many of the charts. Admittedly a strong dollar helped – but the story runs deeper: it’s a tale of US exceptionalism, Wall Street strength, and a tech sector that’s gone global but remains American-led. However given our bearish structural dollar view, we think US cities would slip down these lists in the years ahead.

The report covers lots of measures, including who has the best quality of life, where are salaries soaring, how much an apartment will cost, and where’s the cheapest place to go on a “cheap date” with your partner. It’s got a bulleted summary section followed by further commentary, and includes the full tables across all 69 cities. The financial market city with the best quality of life is 90 places ahead of its FIFA world football ranking. Can you guess who it is? Please delve into the report at your leisure for this and much much more.

When it comes to the last 24 hours, near-term inflation fears have rapidly diminished as the ceasefire in the Middle East led to further oil price declines. Indeed, Brent crude was down another -6.07% yesterday to $67.14/bbl, meaning that the two-day decline over Monday and Tuesday is the biggest since March 2022, at -12.82%. It’s also their lowest level since June 10, so just before fears of Israeli strikes against Iran began to surface. This fading geopolitical premium also led to a huge risk-on move across multiple asset classes, with the S&P 500 (+1.11%) seeing its best day in four weeks and closing less than 1% beneath its record high from mid-February. This morning in Asia, US equity futures are flat and oil prices (+1.36%) have edged back up, trading at $68.06/bbl.

The decline in oil yesterday got some extra momentum from Trump’s post that “China can now continue to purchase oil from Iran”, suggesting that the US might reduce enforcement of sanctions against Iranian oil. Although it’s fair to say that the statement seems to catch the Treasury and State Departments by surprise. Meanwhile, the truce between Israel and Iran appears to be holding after Trump earlier blamed both sides for initial breaches. Israel’s Prime Minster Netanyahu confirmed that he agreed to the truce with Iran, claiming a “historic victory”. The UN nuclear watchdog has urged a rapid restart of inspections of Iran’s nuclear facilities, with The New York Times and CNN reporting that a preliminary assessment by US intelligence was that the recent strikes likely did not fully cripple Iran’s underground facilities and may delay its nuclear programme by less than six months. White House spokeperson Leavitt called the reporting “flat-out wrong” though.

Turning back to yesterday’s market moves, the key reason the market rallied so much was because lower oil prices (and hence lower inflation) are keeping the prospect of rate cuts in play this year. Indeed, futures priced in more rate cuts from the Fed in response, with the amount expected by the December meeting up +4.3bps on the day to 59bps. That’s the most rate cuts priced in six weeks, just before the US-China tariffs were slashed by 115 percentage points, which reassured markets that there wouldn’t be a downturn. This time around, lower inflation rather than growth fears have been the main driver of the repricing, and US Treasuries rallied strongly across the curve as a result. For instance, both the 2yr and 10yr yield hit their lowest level since early May, with the 2yr yield (-3.8bps) down to 3.83%, whilst the 10yr yield (-5.3bps) fell to 4.30%. That said, the decline in yields also gained considerable momentum from the Conference Board’s consumer confidence indicator, which unexpectedly fell to 93.0 in June (vs. 99.8 expected) with the share of responders who said that jobs were plentiful falling to their lowest level since the pandemic.

But even as markets were pricing in a growing chance of a rate cut this year, there was little sign of any rush from Fed Chair Powell in his latest testimony. He reiterated his message from last week’s press conference that they were “well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance.” Looking forward, he also said that the tariff inflation would be evident in the June and July numbers, so that implicitly leant in favour of waiting until September before any further rate cuts. Meanwhile, Cleveland Fed President Hammack also said that it “may well be the case that policy remains on hold for quite some time”. She also said that “I would rather be slow and move in the right direction than move quickly in the wrong one.” Just after the European close NY Fed Williams’ comments were similar to Powell’s with him saying that it was “entirely appropriate” to maintain the current policy stance and that it was still “early days” in terms of the impact of tariffs on inflation. Fed Governor Barr also struck a “wait and see” tone, noting the potential for “some inflation persistence” due to second-round effects.

Nevertheless, those more hawkish comments failed to halt the rally, as the market view was that the deflationary impulse from lower oil prices would bring about quicker rate cuts. So that provided a significant boost to equities on both sides of the Atlantic. The S&P 500 was up +1.11%, and tech stocks led the way as the NASDAQ advanced by a bigger +1.43% while the narrower NASDAQ 100 (+1.53%) reached a new record high. Meanwhile in Europe, the STOXX 600 (+1.11%) posted its biggest gain in six weeks, alongside fresh moves higher for the DAX (+1.60%) and the CAC 40 (+1.04%).
Staying in Europe, the German government yesterday agreed on a budget draft for 2025 as well as on benchmark budget figures for 2026-2029. According to our economists’ piece here, the fiscal package sends a strong signal: the government intends to lose no time in ramping up public investment in Germany’s defence and infrastructure.

While the medium-term fiscal plan is largely in line with their assumptions, the budget draft for 2025 implies greater front-loading of the fiscal stimulus than we expected. The government plans to spend more than EUR 200bn on defence and infrastructure this year, and to raise more than 3% of GDP in fresh debt to fund this investment spree. This implies a sharp fiscal easing in the second half of the year. Although it may be difficult to spend these funds in their entirety by the end of the year, the ambitiousness of the fiscal expansion should spur the recovery in private investment. There is near-term upside risk to growth from this. On this theme, yesterday’s Germany Ifo business climate indicator moved up to a one-year high of 88.4 in June (vs. 88.0 expected). Together with the stronger German PMIs on Monday, this adds to the sense of the new government’s policy shift translating into stronger business confidence.

While the German fiscal announcement had been substantially flagged in recent reporting, it still drove 10 yr German bund yields +3.7bps higher on the day, with the Italy-Germany spread (-5.5bps) seeing its biggest tightening in ten weeks. French OAT yields (+2.0bps on 10yr) also moved slightly higher amid news that its government is expected to face a no confidence vote in the next couple of days following a collapse of talks on pension reform.

With everything else going on, the US tax bill currently in the Senate has received less attention recently. However, President Trump reiterated his call yesterday for a quick passage, with the administration still trying to get it done by their July 4 deadline. In a post on Truth Social, Trump called on Senators to “lock yourself in a room if you must, don’t go home, and GET THE DEAL DONE THIS WEEK.” It’s already passed the House by a single vote, but both chambers have to pass the same version of the bill, so the revised version by the Senate would need to go back to the House for a vote. In terms of the latest timeline, Treasury Secretary Bessent suggested that House and Senate Republicans could reach agreement on the state and local tax deduction in the next two days, while Senate Majority leader Thune said he expects the Senate to start voting on the bill on Friday, setting up a potential weekend of votes. Beyond that, NEC director Kevin Hassett said that after the bill was passed, they’d be announcing trade deals with other countries, which comes with just two weeks now remaining until the July 9 deadline for the 90-day reciprocal tariff extension. Hassett said that “we’re very close to a few countries and are waiting to announce after we get the Big Beautiful Bill closed”.

In Asia calm seems to have broken out with the Hang Seng (+0.79%) the top performer so far this morning, with the CSI (+0.34%), the Shanghai Composite (+0.26%), and the Nikkei (+0.18%) also higher. The KOSPI (-0.10%) is slightly lower.
Early morning data revealed that Australia’s headline consumer price index inflation (+2.1% y/y) cooled more than anticipated in May (compared to +2.3% expected), marking its slowest pace in seven months. It decreased from the +2.4% recorded in April. Underlying inflation, as indicated by the annual trimmed mean CPI, increased by +2.4% y/y in May, down from +2.8% in April. This print indicated that underlying inflation is at its lowest level since November 2021, likely providing the RBA with more flexibility to further reduce interest rates. Consequently, our economists now expect the RBA to reduce rates by 25bps at its upcoming meeting on 8 July. Initially, we anticipated no changes in July, with a 25bp cut expected at the August meeting. We continue to foresee an additional 25bp cut in August, followed by another 25bp reduction in November. Thus, the only modification to our RBA outlook for this year is the inclusion of an additional cut in July. For further insights, please read our economists’ perspective on RBA policy.

In Japan, a summary of opinions from the BOJ’s latest policy meeting suggested that some policymakers supported maintaining steady rates amid uncertainty regarding the effects of US tariffs on Japan’s economy. Some board members observed stronger-than-expected inflation, with one member proposing that the central bank may need to raise rates decisively despite the prevailing economic uncertainty.

To the day ahead now, and we’ll hear from Fed Chair Powell again at the Senate Banking Committee, as well as BoE Deputy Governor Lombardelli. Data releases include US new home sales for May, and France’s consumer confidence for June. Finally, it’s the second and final day of the NATO summit, with Trump joining for meetings with European leaders.

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