U.S. stock index futures traded modestly higher on Monday as investors prepared for a week packed with major economic releases and speeches from leading central bankers, while monitoring reports that the United States and Iran have agreed to suspend recent military action in the Strait of Hormuz.
Futures Edge Higher
By 03:11 ET (07:11 GMT), Dow Jones futures had added 107 points, or 0.2%, S&P 500 futures were up 36 points, or 0.5%, and Nasdaq 100 futures had gained 223 points, or 0.8%.
The major indices ended last week slightly lower after reports suggested that a highly anticipated initial public offering by ChatGPT developer OpenAI (NASDAQ:OAI) could be delayed. The news weighed on artificial intelligence and data centre stocks, which have been among the strongest beneficiaries of heavy investment in AI infrastructure.
“The deterioration in sentiment around AI has certainly weighed on the Nasdaq and capitalization-weight S&P, but by diminishing the stranglehold this industry has had on markets, money is being liberated to shift into more neglected areas,” analysts at Vital Knowledge said in a note.
Reports Point to Temporary U.S.-Iran Ceasefire
According to media reports, Washington and Tehran have agreed to suspend several days of retaliatory strikes around the Strait of Hormuz, easing concerns over shipping through one of the world’s most strategically important energy routes.
The Wall Street Journal, citing U.S. officials and sources involved in the negotiations, reported that both countries are preparing to resume diplomatic discussions. Officials indicated that the United States had proposed holding talks in Doha, although the timing of the meeting has not yet been finalised.
The latest military tensions began on Thursday following attacks near the Strait of Hormuz, disrupting shipping traffic that had only recently begun recovering after an earlier ceasefire agreement linked to negotiations over Iran’s nuclear programme. As around one-fifth of global oil and liquefied natural gas flows through the waterway, any disruption continues to represent a significant risk to the global economy.
Oil Holds Firm
Oil prices remained relatively stable as traders continued to assess the outlook for tanker traffic in the Persian Gulf. Brent crude was up 0.5% at US$72.32 per barrel, while U.S. West Texas Intermediate crude rose 1.0% to US$69.91 per barrel.
“The oil market has seen only modest gains this morning despite the re-escalation between the U.S. and Iran […],” analysts at ING said in a note to clients.
“Even so, we continue to believe the market is too optimistic about the timeline for a recovery in Persian Gulf supplies[.]”
Central Banks and Data in Focus
Attention now turns to the European Central Bank’s annual Sintra Forum in Portugal, which opens with a keynote address from ECB President Christine Lagarde. The event will also feature a panel discussion on Wednesday involving Federal Reserve Chair Kevin Warsh.
Investors are looking for further guidance on monetary policy after recent uncertainty over whether higher energy prices could generate renewed inflationary pressures. While the ECB and the Bank of Japan have already raised interest rates, the Federal Reserve and the Bank of England have so far kept policy unchanged.
Markets will also receive a series of important economic indicators during the week, including Eurozone inflation figures and the U.S. employment report.
Preliminary data are expected to show Eurozone inflation easing to 3.0% in June from 3.2% in May, while core inflation is forecast to remain at 2.6%.
In the United States, Thursday’s non-farm payrolls report is expected to show that 114,000 jobs were created in June, down from 172,000 in May, with the unemployment rate projected to remain at 4.3%.
Ahead of the employment figures, investors will also monitor consumer confidence, job openings, private-sector payrolls and manufacturing activity.
“Ultimately, the key directional catalyst will be June’s payrolls,” the ING analysts said in a note.
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