U.S. Indices saw choppy trade action on Friday amid quad-witching as participants returned from the Juneteenth market holiday on Thursday, whereby upside was seen in equity futures in response to the two weeks Trump has given himself to decide whether to attack Iran. Friday, however, saw cash equities close lower, amid a few important headlines. Stocks found upside from an Iranian Senior official who said Iran is ready to discuss limitations on its uranium enrichment. The move sparked immediate downside in crude, which has now ultimately pared and also saw a swift reversal as the official quickly added they will undoubtedly reject a zero enrichment proposal. In addition, likely supporting the crude rebound were the talks in Geneva between the E3/EU/Iran, which have seemingly yielded little progress thus far, with the only positive being that discussions will continue. Note, WTI ended the day with slight gains, Brent with notable losses, as the disparity came due to no WTI settlement on Thursday on account of the US market holiday. Aside from geopolitics, two headlines weighed on stocks: 1) Wall Street Journal reporting US prepares action targeting allies’ chip plants in China, 2) Japan scraps US meeting after Washington demands more defence spending, via the Financial Times. Sectors saw mixed performance, with Energy, Staples, and Utilities gaining, while Communications and Materials saw losses. Separately, fixed income was helped by two factors as Fed’s Waller stuck with his very dovish stance, and Philly Fed disappointing. On the former, Waller said their in a position to cut as early as July, and shouldn’t wait for the job market to tank before cutting rates. Meanwhile, Barkin (2027 voter) sees no rush to cut rates, citing nothing urgent seen in the data warranting such a move. In FX, the Dollar haven bid was weighed on by the possible hopes of limitation on uranium enrichment in Iran. GBP was modestly lower against USD following a poor UK Retail Sales report, the Japanese Yen was little bothered by a slightly hotter than expected CPI report, and the Canadian Dollar traded within tight ranges after a disappointing retail sales report. While Trump’s deadline for a decision on Iran is due within two weeks, military action or diplomacy could occur at any time, and as such, participants will be very wary of weekend risk given any possible escalation. The Philly Fed headline was unchanged in June at -4, but expectations were for it to rise to -1, albeit still remain in negative territory. In the breakdown, Employment plunged below zero to -9.8 from +16.5, its lowest value since May 2020, while the inflationary gauge of Prices Paid encouragingly dropped to 41.4 from 59.8. New Orders and Capex dipped to 2.3 (prev. 7.5) and 14.5 (prev. 27.0), respectively, but Shipments rose 21 points to 8.3, its first positive reading since March, with the 6m index tumbling to 18.3 from 47.2. Fed Member Waller was the first Committee member to speak since the blackout, and spoke very dovishly, a stance he has had for a notable while. Waller said central banks should look through tariff effects on inflation, and the Fed is in a position as early as July for cuts. As a reminder, the median dot plot for year-end 2025 had 50bps of cuts. Waller added the Fed has room to bring rates down and then can see what happens with inflation, and not sure if the committee would go along but the data is good, unemployment is low, and inflation is close to target. The dove said the process should start slow to be sure there are no surprises and if there is a shock the Fed could pause. On data, said so far the data has been fine, with no reason to wait much longer to cut, and The Fed has been on pause for six months waiting for an inflation shock that has not arrived. Further still, Waller said the central bank Fed should not wait for the job market to crash in order to cut rates; don’t want to wait for the job market to tank before cutting rates, and tariffs will not be completely passed through, and a 10% tariff on all imports would not have much impact on overall inflation. Meanwhile Barkin conformed to the usual rhetoric we heard from Fed members pre-decision, and also as Powell toed in the press conference on Wednesday. The Richmond Fed President said he sees no rush to cut interest rates and is not ready to dismiss inflation risk from tariffs. Regarding future plans, added nothing urgent in the data warranting a rate cut at this point. Elsewhere, Oil closed higher by 0.34% while Gold ended Friday’s session with a loss of 1%. Over the weekend we saw escalation in the Iran War as America joined Israel in attacking the nuclear sites. These are the facts that we know so far:
- US President Trump confirmed the launch of “Operation Midnight Hammer”, which involved targeted strikes on Iranʼs nuclear facilities at Fordow, Natanz, and Isfahan.
- US President Trump warned that “many targets remain,” emphasising that the US had no desire for regime change but threatened larger future strikes if Iran failed to engage diplomatically.
- The Iranian parliament has approved the closure of the Strait of Hormuz after the US launched strikes against the countryʼs nuclear facilities. Iranʼs security body will make the final decision on whether to proceed with the plan, state television reported.
- Iranian regime sources denied any major nuclear material loss from the strikes, implying the sites had been preemptively evacuated. Iranian officials have warned that future actions could target over 20 US bases or naval assets in the region.
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