U.S. stock futures mixed after new tariffs, longer deadline; Prime Day starts
Investing.com - Elevated tensions in the Middle East following an exchange of airstrikes between Israel and Iran are set to be a major focus for investors this week. Leaders from the Group of Seven nations are gathering in Canada, with the fresh conflict between Israel and Iran a top concern, as well as a lingering trade dispute with the United States. Meanwhile, the Federal Reserve will headline a slate of global central banks due to unveil their latest interest rate decisions in the coming days.
1. Iran-Israel violence
Oil prices renewed their advance on Monday, as markets assessed few signs of easing in the conflict between Israel and Iran.
By 03:37 ET (07:37 GMT), Brent crude futures had climbed by 0.4% to $74.53 per barrel, while U.S. West Texas Intermediate crude futures rose 0.5% to $71.64 a barrel. Both of the contracts had soared by over $4 earlier in the session.
Israel and Iran exchanged fresh strikes over the weekend that killed and wounded civilians, and threatened to send the Middle East spiralling into a broader regional conflict.
Tehran has told mediators Oman and Qatar that it will not engage in ceasefire talks helmed by the U.S. while Israel is carrying out its strikes, Reuters has reported, citing an official briefed on the matter.
Israel, meanwhile, has warned Iranians living near nuclear facilities to evacuate. The country targeted these locations and other ballistic missile programs in a wave of attacks first launched early on Friday. Surface-to-surface missile sites were attacked by Israel on Monday.
2. G7 summit
The conflict between Israel and Iran is set to be high on the list of priorities at a meeting of leaders from the Group of Seven nations in Canada this week.
Media reports said that the representatives are planning to issue a joint statement on the situation urging both sides to deescalate. German Chancellor Friedrich Merz said he will aim for the summit to conclude that while Iran cannot develop its nuclear weapons capabilities and ensure Israel’s right to defend itself, there is still space for diplomacy.
Officials will also likely be treading carefully to avoid falling out with U.S. President Donald Trump, particularly as Washington conducts ongoing negotiations with a host of nations over Trump’s punishing "reciprocal" tariffs.
Canadian Prime Minister Mark Carney has stressed that the summit will push for peace and security, although he has suggested that Ottawa could hit back at the U.S. if the White House does not lift its tariffs on steel and aluminum.
3. Federal Reserve meeting; central bank decisions
The Federal Reserve is due to hold its latest policy meeting, with the central bank widely expected to leave interest rates unchanged.
Officials have broadly adopted a wait-and-see attitude to rate changes in recent months, reacting to lingering uncertainty around the impact of Trump’s tariff plans on inflation and the labor market.
Relatively benign inflation readings and stable weekly jobless claims figures have helped to soothe some investor worries around the effect of the sweeping duties on economic activity.
However, a surge in oil last week, along with Monday’s additions, have underpinned a fresh inflationary pulse that, should it be sustained, could bolster the likelihood that the Fed keeps rates on hold at a target range of 4.25% to 4.5% on Wednesday.
Beyond the U.S., a host of other interest rate decisions are due out, including announcments from central banks in Switzerland, Sweden, the United Kingdom (TADAWUL:4280), and Norway.
"This was always meant to be a very busy week for markets, as a few key central bank meetings – including the Federal Reserve’s – were set to refresh the market understanding of policymakers’ stance on the inflation-growth balance in the second month of global U.S. protectionism," analysts at ING said in a note to clients.
"But as we know, geopolitical developments have stormed into the picture, and the implications of the Middle East crisis for energy markets can easily spill over into central banks’ inflation assessments."
4. U.S. retail sales ahead
On the economic calendar, U.S. retail sales are due to be among the most closely-monitored figures this week, with investors keen to see if Trump’s trade agenda is denting consumer demand.
Economists expect retail sales to decline by 0.6% month-over-month in May, reversing growth of 0.1% in April.
Despite ongoing anxiety over the aggressive tariffs, U.S. consumer sentiment improved for the first time in six months in June thanks to hopes for a trade detente between the U.S. and China, a survey from the University of Michigan showed last week.
But analysts flagged that, if geopolitical tensions cloud over sentiment and threaten to lead to a sustained jump in oil prices, the improvement could be short-lived.
5. Chinese data
Chinese industrial production grew slightly less than expected in May as high U.S. tariffs weighed on overseas orders and domestic output.
But other data showed that Chinese retail sales blew past expectations in May on support from holiday spending and local shopping events, which helped offset broader weakness in consumer spending.
Industrial production grew 5.8% year-on-year in May, according to government data on Monday. The reading was just below expectations of 5.9% and fell from a 6.1% rise seen in the prior month.
The softer industrial production print was driven largely by weaker overseas orders, as export demand to the U.S. was dented by the high tariffs. This was partly counterbalanced by robust demand in other destinations, while U.S. demand also improved after Washington and Beijing agreed to temporarily lower their trade tariffs on each other.