U.S. stock futures rose and Treasurys steadied in early European trade, as lower oil prices eased pressure on yields following Treasury Secretary Scott Bessent's speech on U.S. sanctions against Iran.
Bessent warned that countries and companies that do business with Iran will face retaliation from the U.S. However, he didn't outline any specific steps the U.S. would take against individual countries, including China--a key trading partner for Tehran.
Oil pulled back in response, while the dollar strengthened to a one-week high. The greenback's small recovery wasn't enough to take steam out of the sharp run up in cryptocurrencies, with Bitcoin holding above $80,000 in European trade.
Asian artificial intelligence-linked stocks slid, though Nasdaq futures rose as investors position ahead of Nvidia's narrative-setting earnings release Wednesday.
For the day ahead, investors will look for U.S. consumer confidence data among other releases.
Oil prices fell in early trading. Brent crude oil contracts for October delivery fell 0.4% to $91.84 a barrel, while the U.S. gauge WTI slipped 0.5% to $84.55 a barrel. Treasury Secretary Scott Bessent said the U.S. was sanctioning more than 60 entities, individuals and vessels tied to the regime, but didn't outline any specific steps against individual countries like China, a major buyer of Iranian oil. "The market seems largely unfazed by Washington's push for tighter economic pressure on Iran, with traders treating the U.S. effort to nudge partners away from Iranian trade as marginal rather than market‑moving," analysts at ING said.
In the U.S., futures for the Dow Jones Industrial Average nudged up 0.1%, while the S&P 500 added 0.2%. Nasdaq futures added 0.5%.
Asian equities were mostly lower Tuesday afternoon amid AI-related concerns and continuing Middle East tensions. South Korea's Kospi edged 0.2% lower, with chip-making index heavyweights SK Hynix and Samsung Electronics declining 1.6% and 1.0%, respectively. Hong Kong's Hang Seng Index shed 0.25%, China's Shanghai Composite was down 0.1%, and Taiwan's Taiex lost 0.2%. Meanwhile, Japan's Nikkei Stock Average rose 0.4%, reversing morning losses, and Singapore's FTSE Straits Times Index added 0.4%.
European indexes rose at the open. Defense and industrial stocks rallied as the Europe-wide Stoxx 600 added 0.35%. London's FTSE 100 edged 0.1% higher, led by defense group Melrose, which surged 8.8%. In Frankfurt, the German DAX gained 0.3%, with Siemens Energy rising 1.8% after a Bloomberg report said the group might sell part of its steam turbine business. Aerospace groups Safran and Airbus--up 1.5% and 1.3%, respectively--helped push the CAC 40 0.3% higher in Paris, though luxuries weakened. The Italian FTSE MIB added 0.6%, while the Spanish IBEX 35 gained 0.4%. The semiconductor-heavy AEX was flat, as BE Semiconductor dropped 2.9% though other AI-linked stocks edged higher.
The dollar rose to a one-week high against a basket of currencies after Treasury Secretary Scott Bessent announced new sanctions aimed at Iran. The threat of exclusion from the dollar-based financial system stoked speculation that some countries and banks might buy dollars pre-emptively, lifting the dollar, IG analysts said in a note. The DXY dollar index rose to as high as 99.106.
U.S. Treasury yields pulled back from earlier highs at the start of European trade. However, yields remain elevated, a signal that Treasurys remain vulnerable after reports that the Treasury is considering using its general account as an option to finance its buybacks. The two-year Treasury yield rose 0.2 basis points to 4.253%, the 10-year yield was up 0.1 bp to 4.712% and the 30-year yield was flat at 5.239%, according to Tradeweb.
Eurozone government bond yields declined in opening trade as U.S. Treasury yields stabilized after rising during Asian trade. Tuesday's eurozone government bond supply comes from Germany, which sells 5 billion euros in the September 2028 Schatz. The 10-year Bund yield fell 1.1 basis points to 3.241% and declines are similar in other 10-year bonds, though 10-year Italian government bonds slightly outperformed.
Gold prices were broadly stable after hitting their highest level since mid-May on Monday. In early European trading, New York futures were flat at $4,696.40 a troy ounce. "Renewed U.S. fiscal concerns [and] uncertainty around Treasury-market credibility...kept demand firm, despite the U.S. 10-year yield staying close to 4.7%," analysts at Sucden Financial said. "Gold now needs to hold above $4,700 an ounce to preserve the stronger tone."
