MNI US OPEN - Israel-Iran Exchange Renews Escalation Fears
EXECUTIVE SUMMARY
- IRAN AND ISRAEL TRADE MISSILE ATTACKS, STRAINING PEACE TALKS
- TRUMP SAYS NETANYAHU WILL HAVE ‘NO CHOICE’ BUT TO ACCEPT A DEAL WITH IRAN: FT
- HOUTHIS TO IMPOSE ‘COMPLETE BAN’ ON ISRAELI SHIPS IN RED SEA
- BOE’S TAYLOR SAYS RATES DON’T NEED TO GO HIGHER AT THE MOMENT
Figure 1: ECB-dated OIS off hawkish extremes, but implied hike pricing remains up to 2bps above Friday’s close
NEWS
MIDEAST (BBG): Iran and Israel Trade Missile Attacks, Straining Peace Talks
Israel and Iran exchanged missile strikes on Monday despite President Donald Trump’s calls for both sides to stop fighting and give peace talks a chance. Iran launched a fresh wave of attacks just hours after firing ballistic missiles at Israel on Sunday. Israel responded with strikes on military targets in western and central Iran, while Iranian state media reported multiple explosions in the capital, Tehran. Israel also struck Iran’s Karun petrochemical company in Mahshahr in a fresh offensive early Monday, the semi-official Fars news agency reported.
US/IRAN (MNI): Trump Says Israel and Iran Must Immediately Stop Shooting
Donald J. Trump posts on Truth Social: "Israel and Iran must immediately stop "shooting." President DONALD J. TRUMP"
US/ISRAEL/IRAN (FT): Trump Says Netanyahu Will Have ‘No Choice’ but to Accept a Deal With Iran
Israeli Prime Minister Benjamin Netanyahu will have no choice but to accept any deal the US negotiates with Iran, Donald Trump said, because the US president “calls the shots”. “He won’t have any choice,” Trump told the FT in a telephone interview. “I call the shots. I call all the shots. He [Netanyahu] doesn’t call the shots.” Trump spoke shortly after Iran launched a salvo of ballistic missiles at Israel in the most serious breach of the ceasefire that was struck in early April. The president separately told Fox News that he would instruct Netanyahu to refrain from taking retaliatory action against Iran — a position at odds with statements from the Israeli military.
MIDEAST (BBG): Houthis to Impose ‘Complete Ban’ on Israeli Ships in Red Sea
The Houthis, an Iran-backed militant group that controls much of Yemen, declared a ban on Israeli ships in the Red Sea, threatening a key bypass route to the Strait of Hormuz. “We declare a complete and total ban on Israeli maritime navigation,” the group said Monday in a statement. “We consider all enemy movements to be legitimate military targets for our armed forces.”
US/UK (Telegraph): Trump Considers Buying Chagos Islands
The White House is considering buying the Chagos Islands, potentially sinking Sir Keir Starmer’s plan to cede the territory’s sovereignty to Mauritius. US officials have drawn up a proposal to bypass Britain and make their own deal to take control of Diego Garcia, the strategically important UK-US military base, The Telegraph understands. It is among several options drafted by Donald Trump’s administration in a paper aimed at providing alternatives to the Prime Minister’s proposal to hand control of the islands to Mauritius, an ally of China and Iran. The White House has been in regular discussions with Downing Street about securing the future of Diego Garcia, one US official with knowledge of the discussions told The Telegraph.
BOE (BBG): BOE’s Taylor Says Rates Don’t Need to Go Higher at the Moment
Bank of England policymaker Alan Taylor says he’s comfortable with interest rates at their current level, according to an interview with Sky News. Taylor notes that “interest rates don’t need to go higher because they’re quite restrictive at the moment.” He feels “comfortable where we are unless we get the worst case scenario,” adding that interest rates cuts are also off the table “until we get more clarity.”
PERU (MNI): Election Uncertainty Likely to Weigh on Local Assets in Extremely Tight Race
The quick count from yesterday’s second-round presidential election run-off points to an extremely close race, with left-wing candidate Roberto Sanchez holding a very narrow lead over right-wing candidate Keiko Fujimori. An Ipsos quick count put Sanchez on 50.3%, vs. 49.7% for Fujimori, while a Datum quick count was even closer, putting Sanchez on 50.14%, vs. 49.86% for Fujimori. On both counts, Sanchez’s lead was within the poll's margin of error. In terms of the actual vote count, with 76% of ballots counted, Fujimori leads on 52%, vs. 48% for Sanchez. However, the count so far has been skewed towards urban areas where Fujimori is likely to perform better. Sanchez is expected to gain momentum as votes in the rural areas of the country are counted.
S.KOREA (BBG): Won Rebounds From Lowest Since 2009 on Korea’s FX Defense Plan
South Korea’s won rebounded after authorities pledged tougher action against speculative trading and market activities seen as worsening volatility, stepping up efforts to arrest a slide that pushed the currency to its weakest level since 2009. The currency climbed as much as 1.6% to 1,533.65 per dollar, after tumbling last week to levels not seen since the global financial crisis. The finance ministry on Sunday announced measures including tighter oversight of offshore currency derivatives, inspections into suspected market misconduct and probes of potentially illegal foreign-exchange transactions. The steps followed an emergency meeting with the heads of the Bank of Korea and financial regulators.
DATA
GERMANY DATA (MNI): Losses in April Factory Orders Centred Around Euro Area
- GERMANY APR FACTORY ORDERS 1.6% Y/Y (6.1% MAR, REV FROM 6.3%)
- GERMANY APR FACTORY ORDERS -3.8% M/M (4.5% MAR, REV FROM 5.0%)
German factory orders underperformed in April (-3.8% M/M vs -2.0% cons; 4.5% prior, revised from 5.0%). Declines appear centered around the euro area this time following the stronger Q1. "When large-scale orders are excluded, new orders were also 3.8% lower than in the previous month. The less volatile three-month on three-month comparison showed that new orders in the period from February 2026 to April 2026 were 3.1% lower than in the previous three months; when large-scale orders are excluded, new orders were up +3.5% in the same period," Destatis comments.
RATINGS: South Africa Upgraded at Fitch, Austria Downgraded at DBRS
Sovereign rating updates of note from after hours on Friday include:
- Fitch affirmed Estonia at A+; Outlook Stable
- Fitch affirmed Hungary at BBB; Outlook Negative
- Fitch upgraded South Africa to BB; Outlook Stable
- Morningstar DBRS downgraded Austria to AA (high), Stable Trend
- Morningstar DBRS confirmed Estonia at AA (low), Stable Trend
- Morningstar DBRS confirmed Hungary at BBB, Stable Trend
FOREX: USD Index Extending Post Payrolls Surge
- The USD index has spent Monday’s session consolidating above the 100 mark following Friday’s highest daily close since March 30. Markets continue to digest last week’s stellar US employment data which has placed further upward pressure on Fed hiking odds in 2026.
- Combined with this, equities remain comfortably off their recent record highs as the lack of ceasefire details and renewed conflict in the Middle East broadly weighs on risk sentiment, underscoring the renewed dollar optimism. This brings the focus back on a key cluster of resistance for the DXY between 100.50/65, which will remain the key obstacle to a further extension north for the greenback.
- Latest weakness for EURUSD has confirmed the recent underlying bearish trend, and the pair is now trading below the bear channel base, which intersects at 1.1541. Spot is hovering just above 1.1500 as we approach the NY crossover, with the focus turning to 1.1411 which remains the key support, the March 13 and 16 lows.
- Overnight highs in USDJPY of 160.39 mean the pair has further narrowed the gap to key resistance of 160.72, the pre-intervention highs reached on April 30. Spot has subsequently drifted back to 160 as intervention worries remain present.
- The backdrop of cyclical USD strength could also target attention to USDCHF as an attractive long for participants looking for a carry position, with the intervention angle more favourable for the pair amid the SNB's continued verbal push in favour of a weaker franc. USDCHF extends fresh 2-month highs in recent trade, continuing to narrow the gap to the year’s highs at 0.8042 with the SNB meeting to follow the FOMC next week.
- Both the data calendar and central bank speak remain light today amid the Fed's and ECB's blackout / quiet periods, and just NY Fed inflation expectations being scheduled.
EGBS: Growth Concerns Drive Steepening Risks to German 5s30s
The German curve has bear flattened this morning (Bobl yields up 2.5bps, 30-year Bund yields up 2bps), with the latest escalation between Israel and Iran reducing prospects of a near-term US-Iran ceasefire deal. 5s30s is currently 79.5bps, with 75bps presenting the initial downside target to monitor. Although a more protracted conflict raises the prospects of a more aggressive ECB tightening cycle, increased growth risks could dominate in the belly of the curve, presenting steepening risks to the likes of 5s30s.
- Bund futures (RXU6) are -30 ticks at 125.23. Initial support is the May 22 low at 125.08.
- 10-year EGB spreads to Bunds have widened a little versus Friday’s close, with BTPs and GGBs around 1bp wider.
- This morning, German factory orders were much weaker than expected (-3.8% M/M vs -2.0% cons, 4.5% prior), even after excluding large scale orders. The June Sentix survey was a little less negative than feared.
- The ECB decision is on Thursday, with a 25bp hike firmly the base case, leaving focus on updated projections and guidance.
Figure 2: German 5s30s Curve
GILTS: Futures Through First Support, Curve Bear Flattens on Middle East Tension
Gilts bear flatten with oil rallying as Iran & Israel exchange missile fire.
- Futures breach initial support at the June 3 low (87.43), with lows of 87.28 registered.
- The break below initial support exposes the May 21 low (86.70). Meanwhile, initial resistance is located at the June 2 high (88.65).
- Zooming out, a short-term bullish theme within a longer run bearish cycle remains intact above the bear trigger (84.98).
- Yields 4-6bp higher, curve flatter.
- 10s haven’t been able to retest 5.00% following last week’s rebound from the 4.80% area. Last 4.95%.
- First BoE hike still fully discounted come the end of the September MPC. 51bp priced through year-end, with ~64bp of tightening priced through April. Liquid BoE-dated OIS contracts 1-8bp more hawkish on the day.
- BoE dove Taylor reaffirmed his well-defined stance this morning, noting that “I think interest rates don't need to go higher because they're quite restrictive at the moment. I feel comfortable where we are unless we get the worst-case scenario, but I really want to get that sense of reassurance that this is moving behind us right now”.
- UK GDP data (Friday) headlines this week’s limited domestic calendar.
- As a result, expect ongoing focus on cross-market matters and the geopolitical backdrop for much of the week.
- On the supply front, we remain on the lookout for the syndicated tap of the 5.25% Jan-41 gilt. We look for this deal to be priced tomorrow/Wednesday, with a GBP6-8bln transaction size.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA (bp) |
Jun-26 | 3.755 | +2.4 |
Jul-26 | 3.874 | +14.3 |
Sep-26 | 4.022 | +29.2 |
Nov-26 | 4.157 | +42.6 |
Dec-26 | 4.245 | +51.4 |
Feb-27 | 4.306 | +57.5 |
Mar-27 | 4.347 | +61.6 |
Apr-27 | 4.371 | +64.0 |
EQUITIES: Friday's Sharp E-Mini S&P Pullback Considered Corrective
Trend signals in EuroStoxx 50 futures continue to highlight a dominant bull cycle, highlighted by moving average studies that remain in a bull-mode position. The recent pause appears to be a flag formation - a bullish continuation pattern. A resumption of gains would pave the way for a climb towards 6200.00 next. Firm support lies at 5916.20, the 50-day EMA. The latest move lower is considered corrective. The trend in S&P E-Minis is bullish and pullback’s appear corrective. Friday’s move down resulted in the break of an important short-term support at 7473.03, the 20-day EMA. The clear breach of this average suggests scope for a deeper short-term retracement towards 7280.56, the 50-day EMA. Note that the 50-day EMA is considered a key support. Key resistance and the bull trigger is 7632.25, the Jun 1 high.
- Japan's NIKKEI closed lower by 2563.52 pts or -3.85% at 64024.6 and the TOPIX ended 96.71 pts lower or -2.45% at 3852.38.
- Elsewhere, in China the SHANGHAI closed lower by 68.398 pts or -1.7% at 3959.338 and the HANG SENG ended 304.89 pts lower or -1.22% at 24657.06.
- Across Europe, Germany's DAX trades lower by 250.3 pts or -1.01% at 24509.74, FTSE 100 lower by 42.65 pts or -0.41% at 10325.37, CAC 40 down 69.35 pts or -0.84% at 8149.13 and Euro Stoxx 50 down 51.37 pts or -0.85% at 6010.7.
- Dow Jones mini down 177 pts or -0.35% at 50757, S&P 500 mini up 14.5 pts or +0.2% at 7414.75, NASDAQ mini up 170.75 pts or +0.59% at 29196.75.
Time: 10:00 BST/05:00 ET
COMMODITIES: WTI Rises Close to 5% Following Latest Israel-Iran Escalation
The primary trend condition in WTI futures remains bullish and recent weakness appears corrective. Key support to watch is $90.57, the 50-day EMA. The contract has traded through it, a clear breach is required to highlight a top and the start of a stronger correction. This would open $77.22, the Apr 17 low. For bulls, key resistance has been defined at $105.21, the May 18 high. Clearance of this hurdle would resume the primary uptrend. Moving average studies in Gold remain bearish and this continues to highlight a dominant downtrend. A sharp sell-off on Friday reinforces the bearish theme. This signals scope for an extension towards the next key support at $4099.2, the Mar 23 low. A clear break of this level would highlight an important medium-term bearish development. Initial resistance is seen at $4519.0, the 20-day EMA.
- WTI Crude up $4.37 or +4.83% at $94.89
- Natural Gas down $0.11 or -3.5% at $3.115
- Gold spot down $39.49 or -0.91% at $4290.03
- Copper up $2.9 or +0.46% at $631.2
- Silver down $0.83 or -1.22% at $67.0565
- Platinum down $13.21 or -0.74% at $1768.4
Time: 10:00 BST/05:00 ET
| Date | GMT/Local | Impact | Country | Event |
| 08/06/2026 | 1200/0800 | * |  US | NY Fed SOFR |
| 08/06/2026 | 1300/0900 | * | US | NY Fed EFFR |
| 08/06/2026 | 1500/1100 | ** | US | NY Fed Survey of Consumer Expectations |
| 08/06/2026 | 1530/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 08/06/2026 | 1530/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 09/06/2026 | 2301/0001 | * |  GB | BRC-KPMG Shop Sales Monitor |
| 09/06/2026 | 0600/0800 | ** |  DE | Trade Balance |
| 09/06/2026 | 0600/0800 | ** | DE | Industrial Production |
| 09/06/2026 | 1000/0600 | ** | US | NFIB Small Business Optimism Index |
| 09/06/2026 | - | *** |  CN | Trade |
| 09/06/2026 | 1200/0800 | * | US | NY Fed SOFR |
| 09/06/2026 | 1215/0815 | *** | US | ADP Employment Report |
| 09/06/2026 | 1230/0830 | ** | US | Trade Balance |
| 09/06/2026 | 1230/0830 | ** |  CA | International Merchandise Trade (Trade Balance) |
| 09/06/2026 | 1255/0855 | ** | US | Redbook Retail Sales Index |
| 09/06/2026 | 1300/0900 | * | US | NY Fed EFFR |
| 09/06/2026 | 1400/1000 | *** | US | NAR Existing Home Sales |
| 09/06/2026 | 1400/1000 | ** | US | Wholesale Trade |
| 09/06/2026 | 1530/1130 | ** | US | US Treasury Auction Result for 52 Week Bill |
| 09/06/2026 | 1700/1300 | *** | US | US Note 03 Year Treasury Auction Result |
