“Early Signs Of A Turn In US Consumer Discretionary,” UBS Says
Brent crude futures tumbled below the $80-per-barrel level earlier this morning for the first time since March as traders priced in the U.S.-Iran peace deal and the expected reopening of the Strait of Hormuz maritime chokepoint on Friday. Goldman Sachs and RBC Capital Markets both slashed their fourth-quarter Brent crude forecasts, reinforcing the view that the war-risk premium is rapidly deflating.
If oil has peaked, then inflation pressures may have peaked as well, a positive setup that could provide some tailwinds for consumers this summer through lower fuel costs.
Piper Sandler Chief Global Economist Nancy Lazar told clients, “If inflation has indeed peaked, that will boost real incomes (nominal incomes have been solid), a positive for both real consumer spending and housing, but don’t expect robust growth in either.”
On Monday, GasBuddy data showed the national average for gasoline slipped below the politically sensitive $4-per-gallon level for the first time in months.
We have outlined in countless notes (read here, here, here, and here) that gas prices above $4 forced consumers to trade down across retailers and, in some cases, to pull back on discretionary purchases altogether.
Pump prices are set to tumble further…
Now that energy prices are moving lower, consumer sentiment is likely to improve. UBS analyst Mark Paski told clients about “early signs of a turn in U.S. consumer discretionary.”
Paski explained:
Fairly quiet day across the US consumer, despite the move lower in crude oil and rates following headlines over the weekend.
…
The risk/reward in consumer discretionary is beginning to shift from the doldrums seen as recently as two weeks ago. The SPDR S&P Retail ETF (XRT) versus front-month crude oil (CL1) suggests there is still further upside to the discretionary trade, given crude’s move lower this morning. Lower yields should also provide incremental support.
Consumer staples were the second-best performing sector last week (behind materials), and I would expect some residual relief today—particularly within the household and personal care space.
Chart: SPDR S&P Retail ETF (XRT)
That said, the CPI for energy is on track to slide for June. But consumers are not out of the woods yet. Months of elevated energy prices have already offset the rapidly fading tailwinds from tax cuts. And not to be the bearer of bad news, but one lagged effect of the energy shock could still show up on supermarket shelves later this year.
Snap’s Goofy AR Glasses Underwhelm Wall Street After Decade-Long Development Push
Snap’s new $2,195 augmented-reality glasses are being viewed by Wall Street analysts less as a mass-market consumer device and more as a developer kit, given the expensive price point.
We suspect Snap’s new AR glasses are unlikely to compete with the Meta glasses in terms of mass adoption, as Meta’s are half the cost, if not cheaper.
Evan Spiegel showing off the new Specs AR glasses to the public for the first time. pic.twitter.com/pCYBLU9xxH
“Earlier today, Evan Spiegel hosted a keynote presentation regarding the Fall ’26 SPECS product release; while not entirely unsurprising, premium price point ($2,195) implies product built for ‘early adopters’, disappointing after a 10yr dev cycle,” Wells Fargo tech analyst Alec Brondolo wrote in a note.
Brondolo’s first take on the new AR glasses:
SNAP announces a $2,195 price point for SPECS; to feature 51-degree field of view and four-hour battery life. While Specs price point compares favorably to HoloLens 2 & Vision Pro (both $3,500), it still positions the product with an ‘early tech adopter’ value prop, disappointing given the length of the dev cycle. Product compares favorably to META Orion prototype from our perspective; field of view smaller (Orion 70 degrees) but unlike META Orion, SPECS doesn’t require a ‘puck’ compute device.
Value proposition to focus on real-world utility; application layer to be driven by a third-party developer ecosystem. While several use cases were demo’d, we believe SPECS value prop to focus heavily on real-world utility (cooking, auto repair, training for sports, etc.). Snap envisions a robust third-party developer ecosystem, supported by agentic coding, will build experiences on Snap OS. Snap did not make SPECS available for product demos on the floor of the Augmented World Expo conference.
Not anticipating SPECS to materialize as a meaningful near-term financial driver. We believe 100k units is a ‘stretch goal’ for the first generation of SPECS, implying $220M of revenue. Assuming 3yrs b/w generations, that further implies $75M of revs / year, or 1% accretion vs. SNAP 2026 consensus revenue; user base likely too small to monetize meaningfully in ads or subscriptions over the near term. While NT revenue pot’l limited, we do believe SPECS will be gross margin positive
In a separate note, Citizens analyst Andrew Boone said Snap’s new glasses told clients, “Appears bulky and more akin to Apple’s Vision Pro glasses than Meta’s Meta Ray-Ban Display from a fashion perspective.”
Boone described the new glasses as “more of a developer kit than a consumer product, as it is priced at $2,195.”
B. Riley Securities analyst Naved Khan said, “While initial adoption is likely to be limited by the relatively high unit price ($2,195), we expect management will use the launch to further improve the product, with successive models becoming more affordable.”
Bloomberg Intelligence analyst Mandeep Singh noted, “Snap’s further expansion into hardware with new AR glasses priced at around $2,195 is unlikely to match adoption of Meta’s Ray-Ban AR glasses,” adding, “The latter’s lower price point and proprietary large language model give it an advantage for deploying image generation and voice integration features, while Snap is likely to struggle to create an app ecosystem and agentic functionality.”
Snap’s release of its new AR glasses comes as Apple pushes deeper into smart glasses following the Vision Pro’s failed launch. We have remained adamant that Meta is winning this race, with Ray-Ban smart glasses emerging as the clearest early consumer winner because of their price point. We have also explored the supply chain behind Meta’s Ray-Ban glasses, which readers can revisit here.
US-Iran Deal Signing Could Come As Early As Today: Report
Summary:
MoU signing could be As Early As Today
Trump Says Will “Drop Bombs” If Bad Final Deal
14-Point US-Iran Draft Deal Released, Set For Friday Signing
Talk of Accelerated MoU Signing Timeline
Axios reports that US, Iranian, and mediator officials are discussing an accelerated timeline for signing the memorandum of understanding, moving it from Friday to as early as Wednesday, potentially via electronic signature.
More from Axios:
The diplomatic source said the discussions around accelerating the timetable were intended to open the strait of Hormuz sooner than Friday, as both parties were in agreement on that issue.
Another factor could be the political pressure on the White House to release the text of the MOU.
The source familiar with the discussions claimed it was Iran that demanded the text not be published until the formal signing, and denied the White House was responding to political pressure.
Even if the electronic signing occurs early, Vice President J.D. Vance and Iranian Parliament Speaker Mohammad-Bagher Ghalibaf are still expected to meet on Friday in Switzerland to launch multi-month talks on Iran’s nuclear program.
The takeaway here is that both sides appear aligned on quickly reopening the Hormuz chokepoint, as the world faces an energy cliff.
Watch Trump
President Trump is set to hold a very important press conference at the conclusion of the G7 summit in France.
Trump Tells Reporters At G7: We’ll “Go Back To Dropping Bombs” if he Doesn’t Like Final Deal
President Trump told reporters on the sidelines of the G7 summit in France that the pending U.S.-Iran memorandum of understanding is “not final” and warned that if he “doesn’t like it … we’ll go back to shooting at them.”
“If I don’t like it [MoU], we’ll go back to shooting at them, dropping bombs on their head,” Trump said.
Trump repeated: “If they don’t behave, we’ll go right back to dropping bombs right smack in the middle of their head.”
He added, “Because they misbehaved for 47 years. But nobody could’ve made this deal. The Obama-era JCPOA handed them $1.7 billion and gave them hundreds of millions of dollars in a Boeing 757. He tried to bribe his way out. I did not do that.”
BREAKING: “If I don’t like it, we’ll go back to shooting at them, dropping bombs on their head.”
President Trump warns Iran that any change to the peace agreement or failure to comply could bring an immediate military response.
The proposed deal, expected to be signed on Friday in Geneva, would extend the U.S.-Iran ceasefire for 60 days and create a framework for negotiations over Iran’s nuclear program.
14-Point US-Iran Draft Deal Set For Friday Signing
With US and Iranian officials preparing to formally sign a memorandum of understanding in Switzerland on Friday, the conflict is entering the much-needed diplomatic phase to avert a potentially disastrous energy cliff. The MoU would open a 60-day negotiating window aimed at ending the war, restoring maritime traffic through the Strait of Hormuz, and hammering out the future of Iran’s nuclear program.
Bloomberg published the text of the 14-point draft MoU, offering the clearest look yet at the proposed trade: de-escalation and sanctions relief for Iran, in exchange for a ceasefire across all fronts, commitments on shipping access, and a broader nuclear deal to be finalized by the end of summer.
But Iran’s Tasnim news agency cited an unnamed official earlier today, saying some of the MoU published by Bloomberg is inaccurate. The report did not specify the discrepancies. Bloomberg noted that some of the wording could be different between the English and Persian versions.
Below is the text of the 14-point draft MoU:
1. The Islamic Republic of Iran and the United States, together with their allies in the current war, declare upon the signing of this Memorandum of Understanding an immediate and permanent end to the war on all fronts, including Lebanon, and undertake that from now on they will not launch any hostile action against each other, and will refrain from the threat or use of force against each other. The final agreement will confirm the provisions of this Article and the remaining Articles
2. The Islamic Republic of Iran and the United States undertake to respect each other’s sovereignty and territorial integrity, and to refrain from interfering in each other’s internal affairs
3. The Islamic Republic of Iran and the United States undertake to negotiate and reach a final agreement within a maximum period of 60 days, extendable by mutual consent
4. Immediately upon the signing of this Memorandum of Understanding, the United States Lift the naval blockade and prevent any interference or obstruction against the Islamic Republic of Iran, and restore traffic within a maximum of 30 days to its full capacity; the traffic of ships shall be proportional to the pre-war volume of traffic on the part of the Islamic Republic of Iran. The United States also undertakes to withdraw its forces from the surrounding areas within 30 days after the final agreement
5. Upon signing this Memorandum of Understanding, the Islamic Republic of Iran will immediately take steps to ensure that the movement of merchant ships from the Persian Gulf to the Sea of Oman and vice versa is resumed within 30 days to the pre-war volume, taking into account the need for the removal of technical obstacles and the neutralization of mines by Iran.
6. The United States undertakes, together with its regional partners, to create a comprehensive plan agreed upon by both parties for the rehabilitation and economic development of the Islamic Republic of Iran, While ensuring financing of at least $300 billion. The implementation mechanism of this plan, as part of the final agreement, will be formulated within 60 days.
7. The United States commits to ending, on a schedule to be agreed upon as part of the final agreement, all types of sanctions currently facing the Islamic Republic of Iran, including resolutions of the United Nations Security Council and the Board of Governors of the International Atomic Energy Agency (IAEA), and all unilateral U.S. sanctions, both primary and secondary.
8. The Islamic Republic of Iran reiterates that it will never produce nuclear weapons. The Islamic Republic of Iran and the United States have agreed that the fate of enriched material and the fate of all other mutually agreed nuclear-related issues, including Iran’s nuclear needs, will be adequately addressed in a final agreement; the final agreement will confirm the provisions of this Article.
9. The Islamic Republic of Iran and the United States agree that, pending a final agreement, they will maintain the status quo: Iran will maintain the status quo on its nuclear program, and the United States will not impose new sanctions on Iran or strengthen its forces in the region.
10. The United States undertakes that immediately after the signing of this Memorandum of Understanding, and until the date of the lifting of sanctions, the United States Treasury Department will issue waivers for exports of Iranian crude oil, petrochemical products and their derivatives, and all related services, including banking, insurance, transportation, and the like.
11. The United States undertakes that, in light of the progress of negotiations towards a final agreement, frozen or restricted funds and assets of the Islamic Republic of Iran will be released and made fully available. These funds, whether held in the master account or transferred, will be used for any final beneficiary payment determined by the Central Bank of the Islamic Republic of Iran and will be fully available for use. The United States undertakes to issue all necessary permits and licenses on this basis.
12. The Islamic Republic of Iran and the United States agree that an implementation mechanism will be established to oversee the successful implementation of and future commitment to the Final Agreement.
13. Following the signing of this Memorandum of Understanding, and upon receipt of assurances regarding the commencement of implementation of Articles 4, 5, 10, and 11 of this Memorandum of Understanding, and the continued implementation of these steps, the Islamic Republic of Iran and the United States will enter into negotiations for a Final Agreement solely with respect to the remaining Articles.
14. The final agreement will be approved through a binding resolution of the UN Security Council
Based on the text above, the first take of the MoU appears to be front-loaded economic relief for Tehran in exchange for a ceasefire, a nuclear freeze, and commitments to negotiate hard topics, such as the nuclear program, at a later date.
Who Stands To Benefit:
Tehran benefits most directly because it gets economic oxygen, oil waivers, frozen funds, sanctions relief language, and reduced US military pressure in the region.
Hezbollah and Iran-aligned actors also benefit if “all fronts, including Lebanon” locks in a ceasefire that constrains Israeli operations.
And, of course, the global economy because global shippers benefit if Hormuz reopens and war risk premiums in crude oil collapse.
The Gulf states benefit if the conflict ends because energy exports through the Strait of Hormuz will resume. A report on Tuesday said that QatarEnergy was planning to ramp up LNG production in the coming months.
Where is Leverage Lost:
The US loses some coercive leverage once the Hormuz blockade ends, oil waivers are granted, and asset-release mechanisms begin.
Israel loses freedom of action if the agreement binds the Lebanon front and limits further strikes.
Sanctions and hawks lose leverage because the draft moves quickly toward broad sanctions dismantlement.
The urgency behind the MoU and locking in peace talks for 60 days, with a formal signing event at the Bürgenstock resort in Switzerland on Friday, stems mainly from the world being headed for an energy cliff, as SPRs globally were being drained to offset the loss of Gulf production with the Hormuz chokepoint shuttered. Brent crude futures edged down overnight, trading around $79 a barrel on Wednesday morning.
One of the biggest uncertainties remains the Strait of Hormuz. President Trump stated that the critical waterway will reopen permanently and be toll-free, but the MoU suggests the toll-free arrangement may only last through the 60-day negotiation period. Another major uncertainty is Tehran’s compliance.
Most Important Overnight Headlines (courtesy of Bloomberg):
US-Iran Deal Framework
• The US and Iran plan to formally sign a memorandum of understanding on Friday, June 19, 2026 in Switzerland, paving the way for 60 days of talks aimed at ending the war and limiting Iran’s nuclear program
• Iran will immediately take steps to reopen the Strait of Hormuz once the tentative deal is signed and will be allowed to sell its oil without restrictions, according to leaked copies of an interim agreement
• Iran is set to receive broad financial incentives including the right to sell oil immediately, access to a $300 billion development fund, and eventual access to frozen assets
• The US would secure at least $300 billion to rebuild Iran after the war under the accord Web Content – US 6:43 AM
• The memorandum states only that Iran’s stockpile of near-bomb-grade uranium be ‘adequately addressed,’ leaving unresolved the fate of enough material to fuel multiple weapons
International Reactions
• Senate Republicans are pressing the Trump administration for details on the deal and signaled Congress will ultimately vote on the final agreement
• European officials are wary of committing naval ships to clear Iranian mines from the Strait of Hormuz because of confusion about how the work would be done and Trump’s strict end-of-week timeline
• China’s Foreign Minister Wang Yi called for greater international support for the next phase of Iran-US peace talks on Tuesday, cautioning that the interim agreement marks only the beginning of a longer peace process
• European allies disagree with Trump’s optimism that trade can resume by week’s end and have practical questions about what was agreed before committing to de-mining missions
Shipping and Energy Markets
• A third fully-loaded crude tanker, the Suezmax Sonia I capable of hauling about 1 million barrels, left the Iranian port of Chabahar on Tuesday night and crossed the US blockade line heading toward Singapore
• Two oil tankers heading toward Africa U-turned in the Indian Ocean this week, switching destinations to the Middle East as shipowners race to re-position vessels ahead of the possible Strait of Hormuz reopening
• Qatar is beginning to bring some of its LNG tankers back to the Middle East, with at least four empty vessels recently heading toward the region after being idle or heading in a different direction
• Brent oil fell below $80 a barrel on Tuesday for the first time in more than three months as the US-Iran deal boosted expectations for a revival in supply
• The prediction market Kalshi assigns a 51% probability that Strait of Hormuz traffic will return to normal before August 1 and a 68% probability before September 1
Oil Market Impact
• The IEA said world oil consumption will slump by 1.1 million barrels a day this year, the biggest drop since the Covid pandemic in 2020, as higher fuel prices and disruptions curb buying
• The IEA previously expected a decline of about 420,000 barrels a day, making the revised forecast much deeper than anticipated
• A potential peace deal paves the way for a renewed supply glut in 2027, according to the IEA
Clinton quickly endorsed Harris, Biden’s chosen successor, after he exited the race later that summer.
“Here’s what I know: We need to defeat Donald Trump. We need to elect Kamala Harris,” Clinton wrote on Sept. 10, 2024.
Adding to her rebuke on Monday, Clinton said that a different Democratic nominee “would have beaten Donald Trump” if the party had a competitive race.
“I think it was a terrible miscalculation on the part of President Biden,” Clinton continued.
She further suggested the nominee could have been Harris, a governor or a senator. She also said Biden triggered a “terrible dilemma” after he claimed he had never signaled in 2020 that he would be a one-term president.
Her comments come as Biden and former first lady Jill Biden expand their longshot efforts to defend their political legacy amid criticism from Democrats who blame the Bidens for propelling Trump’s grand return to power in 2025.
Biden exited the race only after mounting pressure within his own party following his disastrous performance in the first debate with Trump.
Outlets like Headline USA had long covered the evidence of Biden’s cognitive decline throughout his presidency.
By contrast, Legacy media organizations and Clinton herself downplayed or shielded him from scrutiny.
“Radical Earnings Cut”: JPMorgan Sounds Alarm After BMW’s Forecast Shock
BMW shares cratered in Germany after the automaker warned investors it would slash its 2026 margin guidance to as low as 1%, down from a prior estimate of as high as 6%, amid weakening demand in China, Middle East-related pressures, rising energy costs, and a deteriorating consumer backdrop hitting sales and profitability.
BMW now expects its pretax profit to fall sharply this year, versus a prior expectation of a moderate decline, and for deliveries in the auto segment to slide, compared with a previous expectation of flat performance.
Here’s the new forecast for the year:
Sees automotive Ebit margin 1% to 3%, saw 4% to 6%, estimate 4.9% (Bloomberg Consensus)
Sees Automotive return on capital employed 1% to 5%, saw 6% to 10%
JPMorgan analyst Jose Asumendi called the downgrade a major “wake-up call for the auto industry” and warned that the German luxury automaker must address its compact-segment product strategy in China, where European premium automakers have been priced out of the market.
Asumendi called the downgrade a “radical earnings cut” but noted that BMW is generally executing well. He believes the automaker will likely take one-time charges to downsize its global production footprint, with a particular focus on Europe.
Here is Barclays analyst Christophe Boulanger’s first take on BMW’s big profit warning:
BMW’s profit warning signals a sharp cyclical and regional deterioration, with China and macro/geopolitical factors driving a reset in expectations. While management is addressing costs, near-term fundamentals look weak, with recovery deferred to subsequent years. We reiterate our UW rating.
FY26 outlook sharply downgraded amid China weakness, macro headwinds and restructuring
BMW issued a material profit warning for FY26 on the evening of 16 June, reflecting a sharp deterioration in China and a more challenging macro backdrop (two-thirds of the profit warning). The downgrade is broad-based across volumes, margins, cash generation, and returns, with further measures to adjust the cost base, including a restructuring provision (one-third of the profit warning). This one-off item is said to amortise within two years and not be cash effective in 2026 (indicating a combination of restructuring provisions and impairments). The company will disclose further information at its capital market day in September.
Overall/China market development has been weaker than expected by management at the start of the year. In December 2025, CPCA (Chinese Passenger Car Association) expected flat Chinese passenger car sales in 2026, but in May cut its estimate to -7.6%, then -11%, and to -14.1% on 16 June, versus YTD May actuals of -19.4% for the total market.
New FY26 guidance: Auto deliveries to decline 1-5% (from flat in previous guidance), Auto EBIT margin to range between 1-3% (from 4-6% in previous guidance and 5.3% FY 25), a >15% decline in group PBT (from a 10-15% decline in previous guidance) and FCF to >€2.5bn (from >€4.5bn and €3.24bn in FY25).
Read-across to other OEMs: We view Mercedes as the major OEM on the cross-read (c.50-60% China EBIT exposure vs BMW c.50%). VW is much less exposed at c.20%. We see no meaningful read-across for STLA, RNO.
As stated in our Euroean IG Best Ideas report, 17 June, our Underweight rating on BMW (and Mercedes) is driven by tight valuations versus the peer group (as stated in recent our recent report that highlighted downside risk) and weak FY26 guidance and fundamental outlook.
Shares of BMW in Germany tumbled as much as 12%, the biggest intraday decline in almost two years. For the year, shares are down around 32%.
Shares are trading at Covid lows …
Citigroup analyst Harald Hendriks explained to clients why his team remains “Neutral” rated on BMW shares:
Conclusion — Yesterday’s announcement confirms investor concerns over the sustainability of BMW’s China business. While the profit warning helps bring down earnings expectations, the real question is what other way can BMW reliably boost EPS growth and finally build a “momentum” equity narrative? With no obvious positive equity narrative, with FY26E earnings still under downward pressure, with a structural thematic negative industry trend, with continued industry-punishing EU regulations, and with a limited number of investors in European (German) value names, we think BMW’s undervaluation may persist. Given we see no new positive catalysts at BMW, we maintain our Neutral rating.
As for the STXE 600 Auto & Parts Index (which includes names such as BMW, Mercedes-Benz, Volkswagen, Stellantis, Porsche, Ferrari, Renault, Continental, Michelin, Valeo, and others), Europe’s auto industry has drifted back to 2020 levels.
Europe’s left-wing political elites may want to rethink their strategy of allowing low-cost Chinese EVs to flood the continent before the region’s industrial base suffers lasting damage. BMW’s warning suggests the turmoil is industry-wide and likely spread across the broader European manufacturing complex. Also, climate policies on the struggling continent have been an utter disaster.
Despite Slumping Sentiment, US Retail Sales See Strongest Annual Rise Since Jan 2023
Despite record low consumer sentiment and declining real wages, BofA’s omniscient analysts forecast a blockbuster beat for US Retail Sales for both headline, core, and control group cohorts.
Retail sales should be a blowout beat, according to BofA’s real-time card data pic.twitter.com/NZmfqWzVNr
And they were right with the headline retail sales rising 0.9% MoM in May (+0.6% MoM exp) driving YoY sales up a stunning 6.9% – the best since Jan 2023
Electronics and Food Services saw sales decline very modestly in May while Gasoline Stations, Nonstore Retailers, and Motor Vehicle & Parts Dealers saw the biggest rise…
Core (Ex-Autos and Ex-Autos and Gas) also strongly beat expectations (+0.8% MoM vs +0.6% MoM exp and +0.5% vs +0.3% MoM exp respectively.
Most notably, the ‘Control Group’ which feeds directly into the GDP caluclation rose 0.7% MoM (better than the 0.4% exp)…
Of course this is all nominal-based.
Interestingly, ‘real’ retail sales (admittedly crudely adjusted via CPI) continue to rebound from a negative print in December…
Spending does seem to continue improving despite the cataclysmic decline in confidence…
Nevertheless, back to where we started above and the disgruntled consumer. BofA notes that gas prices took another big leg up in May, rising by 7.0% m/m SA in the CPI report. As a result, the share of discretionary categories in the consumer wallet in May 2026 was lower than in May 2025 levels across all income cohorts.
This is noteworthy because this share has been trending up in recent years.
Lower-income HHs are feeling the pinch of the gas shock more: they’ve seen a larger increase in necessary spending, which has led to a widening of the “K” in discretionary outlays.
Will those alligator jaws begin to close now that gas prices are starting to tumble?
Futures Fade Overnight Gains As Attention Turns To Kevin Warsh’s First Fed Decision
US futures are attempting to bounce back from yesterday’s losses on Wall Street led by Tech. As of 8:00am ET, Nasdaq 100 futures lead the charge, with gains of 0.5% versus 0.1% for the S&P 500 future, although both are off session highs. SpaceX’s post-IPO surge continues, with shares adding another 3% in the pre-market while Mag 7 are mixed: NVDA is up 0.4%, while GOOGL is down 0.5%. The Stoxx 600 is up 0.2%, while the MSCI APAC Index gained 0.5% in mixed trade for regional bourses. Overnight, headlines were largely muted: US retail sales print and earnings from Jabil and CarMax come before the open, but the real action comes later, with attention focused on the Fed and Kevin Warsh’s first FOMC meeting as governor. Bond markets have mirrored some of this choppiness with the exception of gilts, which have been boosted by soft UK CPI metrics. US yields are down 1bp across the curve ahead of Kevin Warsh’s debut as FOMC Chair. The dollar is mixed versus peers. The krona is a touch weaker after the Riksbank held rates as expected. Bitcoin is down 1.3%. Commodities are mostly flat to modestly lower: oil prices have been choppy as investors await the formal signing of the US-Iran peace accord on Friday and financial details of the agreement emerge. WTI crude futures are little changed around $76/bbl.
In premarket trading, SpaceX rises 1.9% to eye a fourth straight day of gains, reinforcing the company’s place among the world’s largest after it surpassed Amazon by market value. Nvidia is outperforming Magnificent 7 peers with semiconductor shares set for a rebound (Nvidia +0.2%, Amazon unchanged, Apple -0.1%, Tesla -0.2%, Meta -0.4%, Microsoft -0.4%, Alphabet -0.5%)
Figma Inc. (FIG) is up 4.2% after Citi initiated coverage of the design software company with a recommendation of buy on expected growth from artificial intelligence demand.
La-Z-Boy (LZB) jumps 16% after the home furniture store’s reported adjusted earnings per share for the fourth quarter beat the average analyst estimate.
ResMed (RMD) slips 1% after Morgan Stanley downgraded the stock to equal-weight from overweight, citing lower revenue growth ahead for the maker of breathing machines.
Rexford Industrial (REXR) is down 1.4% after JPMorgan analyst Michael Mueller cut the recommendation on the real estate investment trust to underweight from neutral, writing that it’s possible the company will see “muted” or even negative growth in 2028 in core funds from operations per share.
In other corporate news, Amazon is said to be facing a possible lawsuit from the US FTC that may lead to billions of dollars in civil penalties, over claims the e-commerce giant misled advertisers. Kuaishou Technology is in discussions with General Atlantic to lead a first round of financing for its video AI arm, Kling AI, ahead of an IPO.
SpaceX shares are poised for a fourth straight day of gains, rising 3.1% in premarket trading. SpaceX may have made headlines for overtaking Amazon’s market cap on Tuesday, but it will take time to catch up on capex spending, or revenue as this Bloomberg chart shows.
Turning to today’s main event – Kevin Warsh’s first Fed decision – we noted in our FOMC preview that while rates are expected to be left where they are, investors will be looking to see which Warsh shows up for his first press conference as chair: Trump’s advocate for lower rates, or the inflation hawk seen around the global financial crisis. The swaps market is not fully pricing in a 25-basis-point hike until March next year, but Warsh is expected to remove the Fed’s “easing bias” today as inflationary pressure builds.
Investors remain divided on the Fed’s next move, with forecasts ranging from rate cuts to multiple increases over the coming year. Oil has slumped on expectations a US-Iran agreement to reopen the Strait of Hormuz will boost supply and ease inflation pressures, prompting investors to reassess the outlook for global interest rates on Fed day. Ahead of the Fed decision, OIS contracts price in around 20bp of tightening by the end of the year. Option traders have been hedging a range of outcomes for Fed policy this year and in early 2027, from cuts to multiple hikes.
“We’re all poised for a hawkish, ready-to-fight inflation Warsh,” Ian Lyngen, head of US rates strategy at BMO Capital Markets, said in an interview with Bloomberg TV. “What happens if he comes out and he’s a lot more dovish?”
JonesTrading chief strategist Mike O’Rourke highlights that two of Warsh’s primary criticisms of the Fed are its expansive balance sheet and over-communication. The communication includes the Summary of Economic Projections, commonly known as the dot plot. “The forecasts are terrible,” notes O’Rourke.
Markets are also watching for changes in Fed communications under Warsh. Bloomberg Economics expects the new chair to forgo submitting his own interest-rate projection to the closely watched dot plot, a break from the practice followed by Jerome Powell, Janet Yellen and Ben Bernanke.
“Warsh faces a formidable challenge, striking a balance between President Trump’s desire for lower rates and signalling to the market that he is a credible and independent Fed chair,” said Bank J Safra Sarasin equity strategist Wolf von Rotberg. “Inflationary pressures in the US are unlikely to abate quickly. Solid growth and elevated core inflation suggest a hawkish bias, regardless of oil prices.”
On the geopolitical front, the US and Iran are preparing to formally sign a memorandum of understanding on June 19 in Switzerland. Still, governments, energy investors and shipping companies remain cautious about how quickly traffic through the Strait of Hormuz can return to normal.
Turning to politics, at the G7 meeting in France, AI is in focus with bosses of OpenAI and Anthropic in attendance. Cut-off to frontier AI models is causing concern, notes Bloomberg Opinion columnist Catherine Thorbecke, highlighting a French presidential candidate calling the move a wake up call, adding that “a nation that depends on others for its technology is a nation that can be unplugged overnight.”
Elsewhere, the IEA said world oil consumption will slump by 1.1 million barrels a day this year, worse than its previous forecast of a decline of about 420,000 a day, the biggest drop since Covid in 2020 amid “higher fuel prices and disruptions to product availability.”
In Europe, the Stoxx 600 is up 0.2%, and holding steady near record highs as investors awaited the Federal Reserve’s rate decision, with German automaker BMW the biggest faller on the Stoxx 600 benchmark after slashing its profitability forecast, weighing on the wider auto subindex. Here are the biggest movers Wednesday:
Straumann shares jump as much as 11%, the most since October, after the Swiss dental implant maker increased its profitability guidance for the year. Analysts were upbeat on the magnitude of the outlook boost
Aixtron shares rise as much as 5.8% after JPMorgan analysts raised their estimates for the German semiconductor equipment supplier and set a new Street-high price target for the stock
PZ Cussons climbs as much as 9.9%, to the highest since September 2024, after the personal care products maker said full-year adjusted operating profit should come in at, or slightly above, the upper end of the previously guided range
BFF Bank shares rise as much as 13% in Milan trading, the most since May 12, after Italian newspaper MF reported that Banco BPM and Amco may be considering an offer for the bank, without citing sources
Lenzing advances as much as 12%, the most since August, after Berenberg turns positive on the textile producer for the first time in almost nine years, upgrading to buy from hold to reflect an improvement in pricing
BMW shares fall as much as 12% after the German carmaker slashed its profitability forecast and ramped up its cost-cutting program, flagging worsening demand in China and negative sentiment from the war in the Middle East.
Orange shares slip as much as 4.1% to the lowest since March after Barclays reinstated coverage with an equal-weight rating, saying upside value from the recent SFR deal is already caputred in valuation
Zealand Pharma falls as much as 8.1% after Berenberg cut its recommendation to hold from buy, saying unlocking upside will now take longer than previously anticipated
Silex Microsystems falls as much as 20% after several brokers initiated coverage of the Stockholm-listed specialist microchip maker that debuted on May 7. SEB starts coverage with a sell rating, saying it’s too richly valued
Medincell shares slump as much as 16%, the most since April 2022, after the French biopharma company reported full-year revenue that analysts said was weaker than expected
Asian stocks advanced for a fourth straight day as investors awaited the Federal Reserve’s first policy decision under new chairman Kevin Warsh. The MSCI Asia Pacific Index rose 0.5%, erasing similar losses from earlier in the session. South Korea’s Kospi led regional gains as shares of memory chipmaker SK Hynix Inc. hit a record high. The Fed decision will cap a week of major central bank meetings, after the Bank of Japan raised interest rates and the Reserve Bank of Australia left policy unchanged, both in line with forecasts. Here Are the Most Notable Movers
Tamron shares surged 24% to a record after the camera lens maker announced an unexpected mid-term plan and a significant expansion of shareholder returns.
Kuaishou Technology shares gain 7.3% on optimism over Chinese AI firms and news that the company is in talks with General Atlantic for the first-round financing of its video unit Kuaishou Kling.
SK Hynix shares gain as much as 5.7% to a record after Korea Economic Daily reported the memory chipmaker is preparing a shareholder return policy worth up to 100t won this year.
Fila SpA has sold 4.25 million shares of DOMS Industries Ltd. for 2,200 rupees each, according to terms of the deal seen by Bloomberg News.
Chinese printed circuit board supply chain stocks extended their climb after a report that a major upstream supplier plans to raise prices. Senasic Electronics Technology shares soar as much as 100% in their Hong Kong trading debut on Wednesday.
Merdeka Gold Resources shares rise as much as 3.2% in Jakarta trading after the Indonesian miner offered 89.7 million HDRs at up to HK$26.60 each in its Hong Kong listing.
Kingboard Holdings shares surge 17.7% after a unit agreed to sell 155 million shares of Kingboard Laminates for HK$76 per share through a block trade agreement.
Senasic Electronics Technology shares more than doubled in their Hong Kong trading debut on Wednesday.
In FX, the dollar is mixed versus peers. The krona is a touch weaker after the Riksbank held rates as expected.
In rates, treasuries are marginally richer across the curve, following steady price action in oil and supported by wider gains across gilts, which outperform after UK headline and core inflation figures rose less than expected in May. Treasury yields remain within 1bp of Tuesday’s closing levels, the 10-year around 4.435%, with UK counterpart outperforming by 4bp; following UK CPI data, 10-year gilt yield dropped to a two-month low 4.734% as BOE rate-hike pricing for this year eased slightly. Focal point of US session is first FOMC decision of Chairman Kevin Warsh’s tenure, expected to hold rates steady. Treasury auctions resume Thursday with $24 billion 5-year TIPS reopening; demand was strong for Tuesday’s 20-year sale
In commodities, WTI futures are up around 0.6% after rebounding from a fresh three-month low in anticipation of a US-Iran deal signing. Bitcoin is down 1.3%.
Today’s US economic data calendar includes May retail sales (8:30am) and April business inventories and May pending home sales (10am)
Market Snapshot
Top Overnight News
Brent held below $80 as traders bet a US-Iran deal due to be signed Friday will reopen the Strait of Hormuz, restore Iranian oil exports and give Tehran access to a $300 billion development program. BBG
The Trump administration’s emerging nuclear deal with Iran risks securing fewer restrictions than the deal negotiated by the Obama administration — one he derided and later scrapped. BBG
As the world awaits the full reopening of the Strait of Hormuz following the signing of an interim peace deal between Iran and the US, the United Arab Emirates is working on a highly ambitious plan to try to end its dependence on the critical chokepoint. BBG
G7 leaders agreed to tighten sanctions on Russia’s oil and gas industry and boost military support for Ukraine. The summit’s final day turns to AI, with OpenAI and Anthropic execs attending. BBG
Senior Trump administration officials had weighed how to structure potential government equity stakes in major AI companies before the government’s export controls on Anthropic further roiled the industry. Semafor
US President Trump’s administration considered requiring Anthropic to obtain government approval before allowing foreign nationals access to its most advanced AI models, as officials weigh new export control measures for AI tech.
FOMC Preview: The most important change in the economic data since the last FOMC meeting is the impressive pick-up in job growth that has put the labor market on a sturdier trajectory. This has left the focus on whether the inflation situation is becoming concerning enough to warrant a rate hike. The war and the increase in oil prices will likely drive headline PCE inflation above 4% and leave core PCE inflation above 3% all year. But so far the impact on inflation looks more like the usual passthrough from large oil shocks than the pandemic’s wide-ranging shortages and price spikes. Link
UK inflation held at 2.8% in May, unchanged from April’s 13-month low and below forecasts from both economists and the Bank of England, official figures showed on Wednesday, a day before the central bank’s next interest rate decision. BoE expected to keep interest rates on hold at 3.75% on Thursday. RTRS
Sweden’s Riksbank assesses that it is well-balanced to leave the policy rate unchanged at 1.75 per cent now, but the probability that the rate will be raised later this year has increased in relation to the assessment in March. Riksbank
Convertible bond issuance surges as companies rush to raise as much money as possible to fund their AI ambitions. WSJ
Middle East News
An informed source told Tasnim that Bloomberg’s alleged text about the US-Iran MoU is not accurate, adding that the text of the memorandum, based on the agreement of the parties, will not be published after it is signed on Friday. However, this was later corrected, stating that the text will be released after the signing on Friday.
US Defence Secretary Hegseth and CIA Director Ratcliffe were among the “most pessimistic” about whether the Iranians would honour their commitments to make substantive concessions on their nuclear program, according to CNN.
A US senior official was said to have dismissed as “preposterous”, the reports of side deals in which Gulf states such as the UAE and Qatar could unfreeze Iranian funds they hold, according to Axios.
The US Senate voted 48-47 to narrowly block a new bid to rein in Trump’s war powers.
Trump administration officials were reported to be discussing ideas to kick-start oil tanker traffic through the Strait of Hormuz, including offering a fee-based “VIP pass” naval escort through the waterway, according to people familiar with the discussions cited by POLITICO.
US officials told a CNN reporter that Iran’s Supreme Leader has given his tacit approval of the MOU, and that there are internal discussions over whether he could issue a statement ahead of Friday’s formal signing ceremony in Switzerland. It was separately reported that US officials downplayed the Iran agreement texts and said that the text omits key back-channel commitments, according to CNN.
Israeli artillery shelling reported in southern Lebanon, according to SNN.
Al Jazeera correspondent reported that 10 rockets were fired towards Israeli forces in the vicinity of Kfar Tebnit town in the Nabatieh district of southern Lebanon.
A more detailed look at global markets courtesy of Newquawk
APAC stocks ultimately traded mixed, albeit at an improvement from the initial losses seen following the subdued lead from Wall St, where most major indices finished in the red amid renewed tech selling. ASX 200 shrugged off early weakness and edged mild gains with upside led by mining, materials and tech, although further upside in the index is capped by losses in energy and the defensive sectors. Nikkei 225 clawed back initial losses and printed a fresh all-time high after briefly topping the 70,000 level. Hang Seng and Shanghai Comp lagged amid losses in auto names and aluminium producers, while they also failed to benefit from a report that the US delayed blacklisting China’s DeepSeek and over 100 Chinese firms deemed national security risks. There was also little reaction seen to the PBoC’s announcement to add overnight reverse repo instruments and to increase overnight reverse repo operations, as it seeks to improve the efficiency of interest rate transmission.
Top Asian News
PBoC Governor Pan said they will allow overseas institutions to access yuan liquidity and will add overnight reverse repo instruments at the appropriate time, while he added they will increase overnight reverse repo operations and improve the efficiency of interest rate transmission. Pan also stated that six banks are authorised to conduct offshore foreign exchange transactions in the Shanghai Free Trade Zone, and commented that it is difficult and unnecessary for China’s credit growth to maintain its previous pace.
PBoC announces an adjustment to the temporary overnight reverse repurchase and outright repurchase agreement time which is to be set between 15:00-15:30 local time (08:00-08:30BST/03:00-03:30EDT). PBoC seeks to ensure flexible and efficient use of temporary overnight reverse and outright repurchase agreements in the open market. Furthermore, PBoC said operating rates will be set at the 7-day reverse repurchase rate in the open market minus 25bps and plus 25bps, respectively, and that it will act when the money market overnight rate remains consistently below or above the respective operation rates of the tools.
Chinese Vice Premier He Lifeng said they will step up financial supervision and will vigorously and orderly advance resolution of local government debt, while He added they will issue CNY 300bln special bonds to replenish the capital of financial institutions and that the financial sector will be opened up further.
China’s financial regulator said they will increase regulatory cooperation in emerging areas and will strengthen efforts to avert systemic financial risks. The regulator will also strictly curb unlawful financial activities and address risks in small and medium-sized financial institutions effectively and orderly, while China is to steer financial resources towards emerging and future industries.
Senior leaders of Japan’s ruling party said to have proposed cutting the consumption tax on food to 1% from April 2027 for a two-year period.
European bourses (STOXX 600 +0.3%) start Wednesday’s trade mixed, with outperformance in the AEX (+0.7%) while the DAX 40 (-0.2%) lags after BMW cut guidance. Geopolitical newsflow has been light thus far as markets await for the official MoU signing on Friday.
European sectors also lack a clear bias. Technology (+1.2%) and Banks (+0.8%) top the sector pile. Autos (-2.1%) is the worst-performing sector this morning, primarily driven by updated guidance from BMW. The Co. cut its operating auto margin to 1-3% (prev. 4-6%) and said it would intensify cost-cutting, with a negative one-off in the H2’26. Analysts at Deutsche Bank and Jefferies both said the outlook cut was significantly larger than expected, which has resulted in the Co.’s shares slumping as much as 11%. This has dragged peers lower with it (Volkswagen -2.4%, Mercedes-Benz -3.0%)
Top European News
UK Inflation Rate YoY (May) Y/Y 2.8% vs. Exp. 3% (Prev. 2.8%); Services 3.7% (exp. 3.7%, prev. 3.2%).
UK Inflation Rate MoM (May) M/M 0.2% (Prev. 0.7%).
UK Core Inflation Rate YoY (May) Y/Y 2.6% vs. Exp. 2.7% (Prev. 2.5%, Low. 2.6%, High. 3.0%).
UK Core Inflation Rate MoM (May) M/M 0.3% (Prev. 0.7%).
EU Inflation Rate YoY Final (May) Y/Y 3.2% vs. Exp. 3.2% (Prev. 3%, Low. 3.2%, High. 3.2%).
EU Inflation Rate MoM Final (May) M/M 0.1% vs. Exp. 0.1% (Prev. 1%, Low. 0.1%, High. 0.1%).
EU Core Inflation Rate YoY Final (May) Y/Y 2.6% vs. Exp. 2.5% (Prev. 2.2%).
DXY is on a modestly firmer footing after softening on Monday alongside a decline in yields and lower oil prices. Focus today is overwhelmingly on Warsh’s first FOMC meeting as chair, where the committee is widely expected to keep the federal funds rate unchanged at 3.50-3.75%. Within the meeting, attention will be on language surrounding the easing bias, and the dot plots, which ING believes a removal of the bias alongside a cut to the 2026 dot plot, would support the Buck. Alongside these points, Warsh’s communication will be closely monitored. (Full Fed preview in the Newsquawk Research suite). DXY lacks direction, trading unchanged and supported just above 99.50.
GBP is a touch lower. In short, a cooler than expected UK CPI print, which falls beneath BoE forecasts on both a headline and core basis, services were also cooler than BoE forecast, but in line/hotter than analyst forecasts, depending on which data vendor is cited. GBP weakened post-data; Cable fell as much as 20 pips to a 1.3408 trough before paring modestly. The pair dipped below its 200DMA at 1.3418.
Two-way action seen in SEK, which is modestly softer post-announcement despite the forecasts implying a greater chance of a 2026 hike. Pressure that is a function of the fact that the forecasts and statement are based on information up to the 11th of June, as such the fall in energy benchmarks seen in the last few sessions on the US-Iran MOU progress is not accounted for, and therefore the hawkish tilt to the policy forecast is likely to be unwound in the next meeting, if the MOU holds and the energy retreat sticks and/or extends. We may get more details from Governor Thedeen at 10:00BST, and the Minutes on the 24th of June.
Fixed Income
Global fixed benchmarks are mixed, with USTs a couple of ticks lower whilst Bunds and Gilts gain; the latter outperforms after the UK’s inflation held steady in May. Geopolitical updates have been lacking today, with all eyes on the US-Iran deal signing on Friday. However, Iran’s Tasnim, citing a source, suggested that the text will not be published after the signing on Friday. Though, this was later corrected and it will be released.
USTs (-2 ticks) hold within a 109-26+ to 109-30+ range. Markets are ultimately on tenterhooks ahead of the Fed policy announcement, which will see the debut of Kevin Warsh as Chair. Policy rates are expected to remain unchanged, so focus will be on whether the easing bias will be removed from the statement. Dot plots are seen to show higher inflation and a more cautious policy path, with the new Chair interestingly not expected to publish a personal dot plot. At the presser, traders will eye whether he attempts to push a dovish agenda and how he contrasts to his fellow board members. From a yield point, Warsh will be eyed for any hints to his thinking on the Fed balance sheet; should markets be guided to faster unwinding of the Fed’s balance sheet, a steeper curve could be expected.
Bunds (+20 ticks) trade firmer this morning, continuing recent price action. Domestically, the release of the ECB Wage Tracker had little impact on German paper, where the 2026 quarterly figure rose slightly from the prior. Focus ahead turns to the EZ Final Inflation metrics for May, which are expected to remain unrevised. From a yield perspective, the German 10yr has now slipped below the 3.00% mark (current 2.93%), and now approaching levels not seen since early April.
Gilts (+57 ticks) outperform vs peers following the region’s inflation report. In brief, a cooler-than-expected print on both a headline and core basis. A series that reduces the odds of a hawkish surprise at the June BoE. However, the as-expected/slightly-hotter (depending on the consensus provider) services figure will be a point of concern for policymakers and may well be enough to keep some dissenters in play, even given the significant energy benchmark moderation in recent days. The report will not have any impact on the policy decision at Thursday’s meeting (BoE to hold), but could push the vote split a bit more dovish vs consensus; analysts saw a range between 8-1 to 6-3 before the inflation print and recent energy moderation on US-Iran progress.
Germany sells EUR 2.107bln vs exp. EUR 2.5bln 3.40% 2047 and 1.80% 2053 Bund.
Australia sells AUD 300mln 4.75% June 2054 bonds b/c 2.46, avg yield 5.3040%.
Commodities
Crude futures are essentially incrementally firmer, hovering at 3-month lows, as markets await the US-Iran MoU signing in Switzerland. Details of the deal remain light; however, Reuters did shine some light on a point of the draft MoU: the rehabilitation and economic development of Iran. The report stated that a USD 300bln private fund is being designed to trigger investment into Iran. The report added that commitments have already exceeded USD 150bln across 5 regions, while the fund will not contain US government money or grants.
Energy benchmarks are relatively contained. WTI Aug’26 oscillates in a USD 74.09-76.06 range while Brent Aug’26 rotates in a 77.75-79.57/bbl band.
Spot gold has come off slightly ahead of the FOMC meeting, in which a hold is expected. Focus will lie in the press conference, in which Fed Chair Warsh is delivering his first post-policy conference in his new role. The yellow metal currently trades at the lower end of its narrow USD 4318-4350/oz range.
3M LME Copper flips either side of the USD 13.8k/t handle as market risk is subdued.
US Private Inventory Data (bbls): Crude -8.3mln (exp. -4.5mln), Distillates -0.5mln (exp. -0.2mln), Gasoline +2.5mln (exp. -1.4mln), Cushing -1.5mln.
IEA OMR (Jun): World oil demand falling by 1.1mln BPD in 2026 on the Iran War (prev. forecast 420k BPD fall); sees total world oil supply 920k BPD lower than demand in 2026 (prev. forecast 1.7mln BPD lower).
TotalEnergies (TTE FP) says its Saudi Arabian refinery was hit by three drones but is still only running at 70% and “probably” will not be repaired until early 2027.
Tanker Trackers reported that two Iranian supertankers carrying a total of 3.8mln barrels of crude oil passed through the US blockade.
Two US Senate Democrats are calling for US Energy Secretary Wright to abandon efforts to build a West Coast SPR, CNN reported. Democrats warned that establishing it this fiscal year would flout the law and usurp congressional authority.
Trade/Tariffs
The US delayed the blacklisting of China’s DeepSeek and over 100 Chinese firms deemed national security risks, to avoid escalating tensions with Beijing, according to sources cited by Reuters.
US Event Calendar
7:00 am: Jun 12 MBA Mortgage Applications, prior 10.8%
8:30 am: May Retail Sales Advance MoM, est. 0.55%, prior 0.5%
8:30 am: May Retail Sales Ex Auto MoM, est. 0.6%, prior 0.7%
10:00 am: May Pending Home Sales MoM, est. 0.9%, prior 1.4%
2:00 pm: Jun 17 FOMC Rate Decision; est. 3.75%, prior 3.75%
DB’s Jim Reid concludes the overnight wrap
It’s set to be a long day: I was up just before 4am to drop my daughter off for a three-day school trip to Disneyland Paris, and will be up late tonight for England’s first World Cup game while also keeping an eye on the outcome of Fed Chair Warsh’s first FOMC meeting. When I was at school, we had a one-day trip to Thorpe Park, a theme park just three miles away. I vividly remember that it cost £4 to get in. The trip to Disneyland Paris is costing me a little more than that! How things have changed.
Thankfully we can park the rollercoaster market analogies at the moment as relative calm has broken out in markets since the war in the Middle East is now seemingly over. The latest overnight was a reported 14-point US–Iran peace framework (reported by Bloomberg) outlining a broad de-escalation package centred on a permanent ceasefire, the lifting of the US naval blockade and the reopening of the Strait of Hormuz with traffic targeted to return to pre-war levels within ~30 days. Crucially, the draft includes immediate waivers for Iranian oil and petrochemical exports upon signing, alongside a broader package of financial incentives including access to frozen assets (timing unspecified) and a ~$300bn externally financed development plan. In return, Iran reiterates its commitment not to pursue nuclear weapons and to neutralise enriched material, with core nuclear constraints deferred to a 60-day second phase of negotiations. Importantly, the benefits appear conditional on compliance, and much of the detail remains fluid ahead of formal signing, underscoring that this is still a high-level MoU rather than a final settlement. The plan is for it to be signed in Switzerland on Friday.
Oil continues to edge lower overnight (Brent -0.42% to $78.61/bbl) after a big fall yesterday with Asian equities relatively quiet. Across the region, the Nikkei (+0.92%) and KOSPI (+0.83%) continue to perform well even with a setback in US tech yesterday that we’ll discuss below. The ASX (+0.50%) is also higher with mainland Chinese equities broadly flat and the Hang Seng (-0.37%) slightly lower. S&P 500 (+0.25%) and Nasdaq futures (+0.54%) are bouncing back after a tougher day for US tech on Tuesday.
Ahead of those overnight moves, global markets had mostly put in another decent performance yesterday although a slump in chipmakers weighed on US equities. The main global catalyst was the US-Iran headlines, with Brent crude (-5.06%) posting a fourth consecutive decline as the two sides prepared to sign the memorandum of understanding this Friday. Indeed, Brent hit a three-month low of $78.43/bbl, which in turn has seen investors increasingly price out the chance of stagflation this year. Indeed we saw rising evidence of the US easing its blockade yesterday with Iranian tankers sailing through it with active location trackers for the first time since April.
That fall in oil prices led to a fresh boost for markets, particularly for European assets which are more exposed to the energy shock. So yesterday saw the STOXX 600 (+0.25%) and Italy’s FTSE MIB (+1.15%) hit another record high, alongside gains for the FTSE 100 (+0.61%) as well.
But for US equities there was a more divergent performance, as weakness among chip stocks dragged on both the S&P 500 (-0.57%) and the Nasdaq (-1.15%). Continued volatility for chipmakers saw the Philly semiconductor index slump by -5.71% from its record high the previous day, after rising by +15.5% after the three previous sessions. Aside from that though, there were some stronger moves, with most S&P 500 constituents higher on the day and the KBW Banks index (+1.64%) up to a new record.
Meanwhile, bonds rallied as investors became increasingly optimistic on the near-term inflation profile. The US 1yr inflation swap fell -9.5bps to 2.57%, its lowest since February 27, the day before the strikes against Iran began. And the 1yr Euro inflation swap (-10.0bps) fell to a three-month low of 2.61%, having been above 3.8% less than a month earlier. So that supported bonds on both sides of the Atlantic. In the US, the 2yr Treasury yield (-1.4bps) was down slightly to 4.05%, whilst the 10yr yield (-3.5bps) saw a bigger decline to 4.44%. European sovereigns saw similar moves, with yields on 10yr bunds (-2.5bps), OATs (-3.6bps) and BTPs (-4.1bps) all moving lower.
Nevertheless, even as oil prices have come down again, there were still warnings about the inflation shock. For instance, ECB chief economist Philip Lane warned that inflation was still in the pipeline, given “four months of elevated energy prices”. He also warned that “There’s going to be indirect effects on food, on goods, on services this year and into next year.” So even with oil prices coming down again, markets are still fully pricing in a second ECB hike before the end of the year, following on from last week’s move.
Speaking of central banks, attention today will be firmly on the Federal Reserve’s decision, which is the first with Kevin Warsh as the new Chair. They’re widely expected to keep rates on hold, but a new Chair often leads to higher volatility at first, because the market is trying to work out their communication style and reaction function. So it could still be an eventful one, even without a change in rates. In terms of what to expect, our US economists think the statement will drop the easing bias from last time, and expect the median dot will no longer signal a rate cut this year, as the last one did in March. Based on prior comments, they think Warsh is likely to avoid forward guidance and an overreliance on short-term data trends. And they also see him tacking towards the centre of the committee, so not arguing for near-term rate cuts, but not taking rate hikes off the table either. For more details, see the full preview here from our US economists.
In terms of the latest market expectations on the Fed, fed funds futures are pricing 21bps of hikes by year-end, with this pricing actually rising +1.3bps yesterday despite the broader rates rally as expectations for any dovish rhetoric from Warsh appear to have eased.
In other news, the European Parliament voted in favour of the EU trade deal with the US agreed last year, by a 440-151 margin. Although the deal was initially reached last summer, there had been several delays to the ratification process, including earlier this year when Trump was threatening to annex Greenland.
Finally, there were a few data releases yesterday, including the ZEW survey from Germany. That showed the expectations measure rising more than expected to 10.5 in June (vs. -5.5 expected), a 4-month high. However, the current situation measure fell more than expected to a 6-month low of -81.0 (vs. -78.0 expected). Then in the US, housing starts saw an unexpectedly big drop in May, falling to an annualised pace of 1.177m (vs. 1.430m expected), which was the lowest since May 2020 during the pandemic.
Overnight in Asia, Japan’s trade deficit narrowed unexpectedly to ¥378.7bn in May (vs. ¥547.6bn expected), supported by robust export growth of +17% year-on-year on strong demand from the US and China. Imports also rose (+12.5% y/y) but came in slightly below expectations. Meanwhile, April’s trade surplus was revised down to ¥299.3bn.
Looking at the day ahead, the main highlight today will be the Federal Reserve decision, along with Chair Warsh’s subsequent press conference. We’ll also hear from the ECB’s Sleijpen. Otherwise, we’ll get the UK CPI release for May, along with US retail sales and pending home sales for May.
In debating a social media ban for minors, it appears we face a choice between two perceived harms.
One is the reported damage that social media is doing to the mental health of children and adolescents.
The other is the normalization of mass age verification systems—most likely involving biometrics—that would apply to everyone, not just minors.
This carries real risks of privacy invasion, data breaches, and future mission creep.
There is little dispute that many Western countries have experienced a rise in youth mental health problems beginning around 2010–2012 (when Smartphones and social media exploded). Anxiety, depression, self-harm, and suicide rates among adolescents, particularly girls, have increased dramatically since this period. There is disagreement, however, not over whether these spikes exist, but whether they can be attributed specifically to social media. The lingering effects of the pandemic and lockdowns, and family breakdown are just some of the other factors that could be in play.
Data debates aside, most Canadians with common sense and personal experience using social media for prolonged periods of time would admit that doing so is harmful for their mental health, no matter their age. So, what should we do?
Whatever steps we take, resorting to broad government-mandated bans and mass surveillance should not be one of them.
Australia offers the clearest real-world test of such a policy. Since its under-16 social media ban took effect on Dec. 10, 2025, platforms operating in the country, including Facebook, Instagram, Snapchat, Threads, TikTok, X, YouTube, Reddit, Twitch, and Kick, have been required to take “reasonable steps” to prevent users under 16 from creating or maintaining accounts. Platforms guilty of breaching this new law can reach up to AU$49.5 million.
Australia’s legislation “specifically prohibits platforms from compelling Australians to provide a government-issued ID or use an Australian Government accredited digital ID service to prove their age.” To comply with the law, platforms have implemented widespread use of behavioural analysis, device signals, and facial age estimation scans. By mid-December 2025, platforms had already removed access to approximately 4.7 million suspected under-16 accounts.
But large numbers of teenagers quickly found workarounds. Surveys conducted in early 2026 show that more than 60 percent of under-16s who had accounts before the ban continue to access at least one restricted platform. Common methods include using borrowed phones or parents’ ID, fake age declarations, VPNs, and printed mesh masks to fool facial recognition.
Without robust age verification systems, therefore, a meaningful ban doesn’t exist.
It might initially remove under 16s, but millions of ineligible minors will find a way to return to these platforms, as has taken place in Australia.
This begs an important question: What is the point of an age verification system that is only half effective?
This would create a new set of problems including the loss of privacy rights for everyone, without actually solving the underlying problem the legalization is reportedly designed to fix.
Canada is aware of this conundrum. What would Canada do, then, to both kick minors off the platforms and keep them off the platforms? There is no reason to think that parental oversight or enforcement will be any different here than across the Pacific.
One possibility is social media users must submit verification of identity every time they log in to the platform. The most obvious way to do this would be a government-mediated login system. This would essentially grant government an immense amount of metadata about who logs in to what, how often, etc.
Another possibility would be for social media platforms themselves to monitors users’ data, either by periodically scanning faces and matching it to submitted photo ID, or by evaluating user behaviour (i.e., what content is being accessed and predicting the age of users). This would give an immense amount of data to social media companies that, if retained, could lead to significant privacy violations. Imagine a camera monitoring you every time you use Instagram or Facebook. Think about the fact that biometric technology can already be used to predict age based on wrinkles, skin texture and elasticity, facial proportions, eye shape, hairline, and bone structure. Researchers have even found statistical correlations between typing speed, error patterns, touch pressure, and age.
In this latter possibility, Canadians would be handing highly sensitive biometric data (faces, fingerprints, typing style, etc.) to foreign corporations that are subject to foreign laws (U.S. CLOUD Act, Chinese national intelligence law, etc.). These companies can be compelled by their own governments to hand over your personal and identifiable data. This type of data is also permanent. If it gets hacked, leaked, or demanded by a foreign government, you cannot change it like a password.
Finally, a mandatory social media ban for minors under 16 would significantly restrict their ability to access information about the world. Freedom of expression under the Charter section 2(b) includes not only the right to speak, but also the right to receive information. Canadian courts have recognized this in several cases. Social media platforms have become one of the primary ways many young people receive news, public debates, educational content, and diverse viewpoints.
One doesn’t have to be an absolutist to value freedom and privacy, but the fact of the matter is we have not tried alternative strategies that would minimally impair this fundamental freedom of privacy for everyone, and freedom of speech for minors. Yes, facial recognition is already used voluntarily on some platforms (such as dating apps). And a driver’s licence is often required from gambling sites to ensure compliance with the law. But there is a profound difference between choosing to use one of these sites and being required by law to submit biometric data to participate in modern public discourse. The scale is also vastly different.
We should pursue less invasive strategies instead of choosing between an ineffective ban or a robust and draconian one. Aggressive cultural campaigns against early smartphone use, phone-free schools until at least Grade 9 or 10, and better parental control tools have all shown meaningful results for youth mental health in multiple studies. Stronger platform liability for addictive design specifically aimed at children could also be pursued.
At the end of the day, parents are responsible for their children’s social media use with or without a law that requires everyone share their digital data. In other words, even if a robust law existed, parents would still be responsible to ensure their children avoid workarounds.
The instinct to protect children is good, but we cannot protect them by quietly dismantling the privacy and freedom of the entire society. The cure must not be worse than the disease.
Read The 14-Point US-Iran Draft Deal Set For Friday Signing
With US and Iranian officials preparing to formally sign a memorandum of understanding in Switzerland on Friday, the conflict is entering the much-needed diplomatic phase to avert a potentially disastrous energy cliff. The MoU would open a 60-day negotiating window aimed at ending the war, restoring maritime traffic through the Strait of Hormuz, and hammering out the future of Iran’s nuclear program.
Bloomberg published the text of the 14-point draft MoU, offering the clearest look yet at the proposed trade: de-escalation and sanctions relief for Iran, in exchange for a ceasefire across all fronts, commitments on shipping access, and a broader nuclear deal to be finalized by the end of summer.
But Iran’s Tasnim news agency cited an unnamed official earlier today, saying some of the MoU published by Bloomberg is inaccurate. The report did not specify the discrepancies. Bloomberg noted that some of the wording could be different between the English and Persian versions.
Below is the text of the 14-point draft MoU:
1. The Islamic Republic of Iran and the United States, together with their allies in the current war, declare upon the signing of this Memorandum of Understanding an immediate and permanent end to the war on all fronts, including Lebanon, and undertake that from now on they will not launch any hostile action against each other, and will refrain from the threat or use of force against each other. The final agreement will confirm the provisions of this Article and the remaining Articles
2. The Islamic Republic of Iran and the United States undertake to respect each other’s sovereignty and territorial integrity, and to refrain from interfering in each other’s internal affairs
3. The Islamic Republic of Iran and the United States undertake to negotiate and reach a final agreement within a maximum period of 60 days, extendable by mutual consent
4. Immediately upon the signing of this Memorandum of Understanding, the United States Lift the naval blockade and prevent any interference or obstruction against the Islamic Republic of Iran, and restore traffic within a maximum of 30 days to its full capacity; the traffic of ships shall be proportional to the pre-war volume of traffic on the part of the Islamic Republic of Iran. The United States also undertakes to withdraw its forces from the surrounding areas within 30 days after the final agreement
5. Upon signing this Memorandum of Understanding, the Islamic Republic of Iran will immediately take steps to ensure that the movement of merchant ships from the Persian Gulf to the Sea of Oman and vice versa is resumed within 30 days to the pre-war volume, taking into account the need for the removal of technical obstacles and the neutralization of mines by Iran.
6. The United States undertakes, together with its regional partners, to create a comprehensive plan agreed upon by both parties for the rehabilitation and economic development of the Islamic Republic of Iran, While ensuring financing of at least $300 billion. The implementation mechanism of this plan, as part of the final agreement, will be formulated within 60 days.
7. The United States commits to ending, on a schedule to be agreed upon as part of the final agreement, all types of sanctions currently facing the Islamic Republic of Iran, including resolutions of the United Nations Security Council and the Board of Governors of the International Atomic Energy Agency (IAEA), and all unilateral U.S. sanctions, both primary and secondary.
8. The Islamic Republic of Iran reiterates that it will never produce nuclear weapons. The Islamic Republic of Iran and the United States have agreed that the fate of enriched material and the fate of all other mutually agreed nuclear-related issues, including Iran’s nuclear needs, will be adequately addressed in a final agreement; the final agreement will confirm the provisions of this Article.
9. The Islamic Republic of Iran and the United States agree that, pending a final agreement, they will maintain the status quo: Iran will maintain the status quo on its nuclear program, and the United States will not impose new sanctions on Iran or strengthen its forces in the region.
10. The United States undertakes that immediately after the signing of this Memorandum of Understanding, and until the date of the lifting of sanctions, the United States Treasury Department will issue waivers for exports of Iranian crude oil, petrochemical products and their derivatives, and all related services, including banking, insurance, transportation, and the like.
11. The United States undertakes that, in light of the progress of negotiations towards a final agreement, frozen or restricted funds and assets of the Islamic Republic of Iran will be released and made fully available. These funds, whether held in the master account or transferred, will be used for any final beneficiary payment determined by the Central Bank of the Islamic Republic of Iran and will be fully available for use. The United States undertakes to issue all necessary permits and licenses on this basis.
12. The Islamic Republic of Iran and the United States agree that an implementation mechanism will be established to oversee the successful implementation of and future commitment to the Final Agreement.
13. Following the signing of this Memorandum of Understanding, and upon receipt of assurances regarding the commencement of implementation of Articles 4, 5, 10, and 11 of this Memorandum of Understanding, and the continued implementation of these steps, the Islamic Republic of Iran and the United States will enter into negotiations for a Final Agreement solely with respect to the remaining Articles.
14. The final agreement will be approved through a binding resolution of the UN Security Council
Based on the text above, the first take of the MoU appears to be front-loaded economic relief for Tehran in exchange for a ceasefire, a nuclear freeze, and commitments to negotiate hard topics, such as the nuclear program, at a later date.
Who Stands To Benefit:
Tehran benefits most directly because it gets economic oxygen, oil waivers, frozen funds, sanctions relief language, and reduced US military pressure in the region.
Hezbollah and Iran-aligned actors also benefit if “all fronts, including Lebanon” locks in a ceasefire that constrains Israeli operations.
And, of course, the global economy because global shippers benefit if Hormuz reopens and war risk premiums in crude oil collapse.
The Gulf states benefit if the conflict ends because energy exports through the Strait of Hormuz will resume. A report on Tuesday said that QatarEnergy was planning to ramp up LNG production in the coming months.
Where is Leverage Lost:
The US loses some coercive leverage once the Hormuz blockade ends, oil waivers are granted, and asset-release mechanisms begin.
Israel loses freedom of action if the agreement binds the Lebanon front and limits further strikes.
Sanctions and hawks lose leverage because the draft moves quickly toward broad sanctions dismantlement.
The urgency behind the MoU and locking in peace talks for 60 days, with a formal signing event at the Bürgenstock resort in Switzerland on Friday, stems mainly from the world being headed for an energy cliff, as SPRs globally were being drained to offset the loss of Gulf production with the Hormuz chokepoint shuttered. Brent crude futures edged down overnight, trading around $79 a barrel on Wednesday morning.
One of the biggest uncertainties remains the Strait of Hormuz. President Trump stated that the critical waterway will reopen permanently and be toll-free, but the MoU suggests the toll-free arrangement may only last through the 60-day negotiation period. Another major uncertainty is Tehran’s compliance.
Most Important Overnight Headlines (courtesy of Bloomberg):
US-Iran Deal Framework
• The US and Iran plan to formally sign a memorandum of understanding on Friday, June 19, 2026 in Switzerland, paving the way for 60 days of talks aimed at ending the war and limiting Iran’s nuclear program
• Iran will immediately take steps to reopen the Strait of Hormuz once the tentative deal is signed and will be allowed to sell its oil without restrictions, according to leaked copies of an interim agreement
• Iran is set to receive broad financial incentives including the right to sell oil immediately, access to a $300 billion development fund, and eventual access to frozen assets
• The US would secure at least $300 billion to rebuild Iran after the war under the accord Web Content – US 6:43 AM
• The memorandum states only that Iran’s stockpile of near-bomb-grade uranium be ‘adequately addressed,’ leaving unresolved the fate of enough material to fuel multiple weapons
International Reactions
• Senate Republicans are pressing the Trump administration for details on the deal and signaled Congress will ultimately vote on the final agreement
• European officials are wary of committing naval ships to clear Iranian mines from the Strait of Hormuz because of confusion about how the work would be done and Trump’s strict end-of-week timeline
• China’s Foreign Minister Wang Yi called for greater international support for the next phase of Iran-US peace talks on Tuesday, cautioning that the interim agreement marks only the beginning of a longer peace process
• European allies disagree with Trump’s optimism that trade can resume by week’s end and have practical questions about what was agreed before committing to de-mining missions
Shipping and Energy Markets
• A third fully-loaded crude tanker, the Suezmax Sonia I capable of hauling about 1 million barrels, left the Iranian port of Chabahar on Tuesday night and crossed the US blockade line heading toward Singapore
• Two oil tankers heading toward Africa U-turned in the Indian Ocean this week, switching destinations to the Middle East as shipowners race to re-position vessels ahead of the possible Strait of Hormuz reopening
• Qatar is beginning to bring some of its LNG tankers back to the Middle East, with at least four empty vessels recently heading toward the region after being idle or heading in a different direction
• Brent oil fell below $80 a barrel on Tuesday for the first time in more than three months as the US-Iran deal boosted expectations for a revival in supply
• The prediction market Kalshi assigns a 51% probability that Strait of Hormuz traffic will return to normal before August 1 and a 68% probability before September 1
Oil Market Impact
• The IEA said world oil consumption will slump by 1.1 million barrels a day this year, the biggest drop since the Covid pandemic in 2020, as higher fuel prices and disruptions curb buying
• The IEA previously expected a decline of about 420,000 barrels a day, making the revised forecast much deeper than anticipated
• A potential peace deal paves the way for a renewed supply glut in 2027, according to the IEA
The aviation world has endured a turbulent week, with a series of high-profile incidents spanning a fighter jet crash, a B-52 bomber crash, and now a business jet that went down on a Texas highway in the overnight hours.
A NetJets Cessna 680 Citation Latitude (N523QS) crashed on a Texas highway while attempting an emergency landing near Laredo International Airport, Texas.
NetJets confirmed to Fox News that its Cessna 680 Citation Latitude was involved in the accident but did not provide details on what led to the emergency landing.
Fox provided more details:
The plane was carrying six people when it crashed on Loop 20 in Laredo, Texas, shortly after 10 p.m., according to Jose Baeza, an investigator with the Laredo Police Department. Baeza also said a vehicle was struck by the aircraft. It was not immediately clear if the person killed was in the aircraft or on the ground.
Footage shows the small business jet partially on fire and split in half while good Samaritans and law enforcement attempted to rescue passengers and crew.
On Monday, a USAF B-52 Stratofortress bomber crashed in California, while a military F/A-18 Hornet crashed 55 miles southeast of Seattle, Washington, on Saturday.
