Germany's DAX and Spain's Ibex closed at record highs, while bond yields fell on both sides of the Atlantic. Traders await the U.S. CPI report for the next signal on rate path.
European shares closed mixed on Monday, but Germany's DAX and Spain's Ibex each set new all-time highs. The DAX rose 0.26%, the Ibex added 0.20%, extending a recent run of record-setting performances across the region. Strong corporate earnings and growing optimism around U.S.-Iran negotiations have pushed European equities higher in recent weeks.
Pakistan's Defense Minister Khawaja Asif said Monday that the U.S. and Iran are close to "some sort of an arrangement," adding that recent signals point toward a peace agreement. Qatar has also indicated that negotiations over the Strait of Hormuz have reached an advanced stage. Shipping disruptions and disagreements over the final terms continue to keep uncertainty elevated, traders said.
European 10-year bond yields moved lower on the day, tracking a decline in U.S. Treasury yields. In the U.S., yields fell after a weaker-than-expected jobs report. Futures pricing now reflects a near-50% probability of a rate cut at the September Federal Reserve meeting, according to CME data. The U.S. CPI report due Tuesday will be the next major test for rate expectations.
Crude oil continued to trade higher despite the more optimistic diplomatic signals. The uncertainty over the Strait of Hormuz remains the dominant driver, leaving oil sensitive to each headline. U.S. stock indexes were mixed, with the Russell 2000 outperforming while the Nasdaq lagged.
Existing home sales in the U.S. came in slightly better than economists had forecast in July, but they fell for a second straight month. High mortgage rates remain the primary drag on affordability and turnover. Inventory has improved relative to the tighter conditions of recent years, but at 4.6 months of supply, it remains below the level associated with a balanced market. Prices continued to rise, though the 2.0% annual gain suggests affordability is gradually improving when adjusted for income growth and inflation.
The next catalyst for markets is the U.S. CPI release on Tuesday morning.
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