U.S. stock futures posted modest gains on Monday evening following a strong session for the major indices, supported by lower oil prices and easing concerns over a military escalation between the United States and Iran.
Dow Jones futures gained 0.18%, while Nasdaq 100 futures rose 0.14% and S&P 500 futures added 0.07%. These movements indicate that investors are maintaining their exposure to equities but remain reluctant to take on additional risk before the release of major corporate earnings and U.S. employment data.
Oil prices declined after President Donald Trump announced that he had canceled a planned military strike against Iran while confirming that communication between the two countries was continuing. The announcement had an immediate effect on equities, with the major Wall Street indices rising between 1% and 2.3% during Monday’s session.
However, the political picture remained unclear. Tehran denied that direct negotiations with Washington were taking place and confirmed only that it was holding talks with Oman regarding vessel traffic through the Strait of Hormuz. Shipping activity through the waterway also remained limited, keeping part of the geopolitical risk premium embedded in energy prices.
Markets viewed the statements as an opportunity to reduce tensions rather than evidence of a completed agreement. Risk appetite improved as a result, but investors did not rush aggressively into higher risk assets.
Technology stocks were among the strongest performers after suffering heavy losses during the previous month. Palantir shares jumped nearly 14% in after hours trading following strong quarterly earnings, helping restore confidence in artificial intelligence and software stocks.
Markets are now awaiting a significant group of corporate earnings reports, including results from SpaceX, AMD, Caterpillar, and Merck. These announcements will help determine whether corporate profits can continue to support elevated valuations, particularly within the technology sector.
Investors are also preparing for the July nonfarm payrolls report. A clear slowdown in hiring or wage growth could strengthen expectations for an interest rate cut. Strong employment figures, however, could encourage the Federal Reserve to maintain a cautious monetary policy for longer.
The U.S. Dollar Index remained close to 99.90 after losing 1.5% during the previous week. The Federal Reserve’s decision to keep interest rates unchanged failed to provide the currency with a clear direction, particularly because policymakers did not present a specific timetable for their next move.
The main pressure on the dollar came from the yen market after authorities confirmed a coordinated intervention by the United States and Japan to purchase the Japanese currency. The dollar fell to 157.18 yen after touching 155.23 earlier in the session.
The importance of this intervention extends beyond the daily price movement. It represents the first coordinated operation of its kind in decades and followed a decline in the yen beyond 162 against the dollar, its weakest level in nearly 40 years.
United States support changes the calculations of currency speculators. During previous Japanese interventions, markets relied on the limited size of Japan’s reserves and expected traders to resume selling the yen once official buying ended. Participation by the United States gives the operation greater force and makes it more difficult for investors to test the limits of monetary authorities.
The 155 level is considered a key turning point for the dollar against the yen. As long as the pair remains above this level, traders may continue buying the dollar during declines. A sustained break below 155, however, could encourage companies and investors to increase currency hedging and sell the dollar during any recovery.
Markets also expect yen weakness and higher energy import costs to encourage the Bank of Japan to accelerate its interest rate increases. A 25 basis point increase in September is now considered more likely than waiting until October.
At the same time, the decline in oil prices of more than 4% reduced inflation pressures linked to energy costs. This weakened part of the traditional support for the dollar that comes from expectations of persistently high U.S. interest rates.
During the coming days, stocks and currencies will be driven by three main themes: corporate earnings, developments in negotiations between the United States and Iran, and U.S. labor market data.
A continued decline in oil prices would support equities and reduce inflation concerns. A breakdown in negotiations or a return to military threats could push energy prices higher and renew pressure on stocks and government bonds.
In the currency market, traders will continue watching the 155 level in the dollar against the yen. Price action around this level may determine whether the coordinated intervention has succeeded in changing the broader market trend or has provided only temporary support for the Japanese currency.
You can now benefit from LDN company’s services through the LDN Global Markets trading platform.
