US equities make solid gains, with the S&P up more than 1%. Rates markets were broadly stable. The US dollar weakened against European currencies, while the yen fell to its lowest level against the US dollar since 1986

US equity-index futures rose in Asian trading after reports the US and Iran had backed away from a fresh escalation, easing concerns over the fragile ceasefire underpinning peace talks. The gains extended overnight, with the S&P close to 1% higher in afternoon trading despite some volatility after the cash open. Brent crude rose above $73 a barrel, having traded near $71 late last week, as markets responded cautiously to the resumption of talks. Elsewhere, the US dollar weakened against most G10 currencies, while rates markets were little changed.

Oil tankers have continued to navigate the Strait of Hormuz despite recent attacks that had made some owners more cautious. Bloomberg ship-tracking data showed several inbound and outbound tankers moving through the waterway, while US assistance with transits had already encouraged more shipowners to proceed.

The US Supreme Court rejected President Trump’s bid to remove Fed Governor Lisa Cook without fuller legal process, reinforcing the central bank’s independence from the White House. Cook can remain in her role while she contests Trump’s attempt to oust her over unproven mortgage-fraud allegations, with the court stating that “monetary policy should not be subject to political interference.”

Treasury yields were little changed after the decision, which didn't come as a surprise. Meanwhile, there wasn’t any economic data to provide the market with direction, and 10-year yields were stable at 4.38%, near the lowest level since early May. The treasury market could see demand into quarter end from rebalancing flows after the strong equity market performance.

German 10-year bund yields were also little changed at 2.86%, showing little reaction to higher-than-expected Spanish headline CPI, even as the core rate printed marginally below consensus. Spain was the first of the larger euro area economies to release June inflation data.

The US dollar was generally softer against G10 currencies, with the euro and pound leading gains. The AUD and NZD were little changed, with NZD/USD continuing to trade in a narrow range around 0.5650 and showing limited directional bias. The NZD has underperformed the euro and pound in recent sessions, leaving NZD/GBP close to last year’s multi-year lows near 0.4250. The yen was only marginally weaker against the US dollar but fell to its lowest level since 1986, keeping markets alert to the risk of intervention.

There was limited movement in NZ fixed income during yesterday’s local session. Swap rates edged 1–2bp higher, tracking offshore moves, with a modest steepening bias. Filled jobs rose 0.3% in May, although April was revised lower, extending the recent pattern of downward revisions. Even so, the data remain consistent with modest growth in the Household Labour Force Survey employment measure in Q2. After retracing last week, pricing for the July RBNZ meeting stabilised near 2.42%, implying around a 70% chance of a 25bp hike next week.

ANZ business confidence is released today, with firms’ activity outlook the key focus as the peak impact of the conflict begins to fade. Inflation expectations and pricing intentions will also be closely watched. Official PMIs are also released in China, while Germany’s preliminary CPI data are due ahead of the euro area measure tomorrow night. In the US, Conference Board consumer confidence and JOLTS job openings will be monitored ahead of the labour market report later this week.

Stuart Ritson is the senior Interest Rates Strategist at BNZ Markets.