The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
1054 GMT - The cost of default protection for euro-denominated credit declines to its lowest in three months as investors are optimistic that the U.S. and Iran could reach an agreement soon to end the Middle East conflict. President Trump said that negotiations with Iran were continuing, raising prospects of a resolution to the conflict and causing Brent prices to drift lower to $94 a barrel. "The further the oil price retreats from the $100 per barrel level, the greater investors' risk appetite," AJ Bell's Russ Mould says in a note. The iTraxx Europe Crossover index of euro high-yield credit default swaps falls 4 basis points to a low of 258bps, S&P Global Market Intelligence data show. (miriam.mukuru@wsj.com)
1047 GMT - Eurozone inflation is set to continue trending upwards as the energy-price shock becomes more permanent, but its knock-on effects will likely be contained, Carsten Brzeski at ING says in a note. "For inflation in the eurozone, the only way is currently up. Not a sharp up but a rather moderate and gradual lift," he says. Oil prices remain lower than many expected, while survey-based inflation expectations have fallen back. An absence of fiscal support and lower savings ratios also mean pass-through of higher energy prices will be limited, with consumers lacking the ability to actually pay these higher prices, Brzeski says. This scenario doesn't call for any aggressive rate hikes following a likely "insurance" hike next week, he says. (don.forbes@wsj.com)
1047 GMT - India's central bank is likely to stand pat in June, economists at Pantheon Macroeconomics says in a note. The Reserve Bank of India's 2%-6% CPI target range seems very secure despite the fuel-price rises since mid-May, and a breach of this range is unlikely until end-2027, they say. The RBI also still has more than enough FX reserves to help the rupee, and the central bank doesn't seem worried about the rupee's recent depreciation yet, they add. For now, India's GDP for the fiscal 1Q is likely to show an economic growth slowdown just as the Middle East broke out, the economists say. (kimberley.kao@wsj.com)
1045 GMT - The combination of the energy price shock and persistently high domestic price pressures paves the way for a European Central Bank rate hike this month, KfW's Dirk Schumacher says in a note. Eurozone inflation rose to 3.2% in May, from 3.0% in April. The continued rise in energy prices pushed inflation to its highest level since September, But while that was widely expected, services inflation also picked up, to 3.5% in May, from 3.0%. That confirms the decline in services inflation in April was due solely to calendar effects, he says. (edward.frankl@wsj.com)
1028 GMT - U.S. Treasury yields fall and the dollar edges lower as investors await progress in the Middle East. The atmosphere is cautious "as market participants weighed conflicting signals surrounding U.S.-Iran negotiations," says BankPro CEO Paolo Broccardo in a note. "Any new signs of setbacks in the diplomatic process are likely to be met with market volatility and could fuel demand for the dollar, particularly given the potential implications for energy markets, inflation expectations, and broader risk sentiment," he says. The 10-year U.S. Treasury yield falls 4.2 basis points to 4.435%, according to Tradeweb. The DXY dollar index falls 0.1% to 99.133. (emese.bartha@wsj.com)
1028 GMT - Currencies in South Korea, Japan and Taiwan are underperforming, contrasting with strong AI-driven equity gains in these markets, Vishnu Varathan of Mizuho Securities Singapore writes in a note. The dissonance is likely due to net foreign-equity outflows from Korea and Taiwan, and constrained current-account dynamics in Japan, he says. Political-fiscal risks are also taking precedence. Supply-side shocks from the U.S.-Iran conflict, particularly with the Strait of Hormuz blocked, are hurting the currencies given their economies' disproportionate energy reliance and risks of industrial input disruptions, he adds. While downward pressures on the currencies could easily reverse if Iran risks are alleviated, the significant uncertainty means the drag will be hard to avoid, he says. (kimberley.kao@wsj.com)
1027 GMT - Ether could rise further against bitcoin after Strategy sold bitcoin holdings for the first time since 2022, Standard Chartered's Geoff Kendrick says in a note. Strategy said Monday that it sold 32 bitcoin last week for about $2.5 million. "I see yesterday as being the start of ether outperformance versus bitcoin." While small, Strategy's selling highlights the different business models of bitcoin digital asset treasury $(DAT)$ companies compared to ether DATs, he says. Ether has a 3% staking yield so there is no need for ether DATs to sell the cryptocurrency, which is different to bitcoin DATs. Ether versus bitcoin rises to a near three-week high of 0.0284530, according to LSEG, and Standard Chartered expects it to reach 0.040 by year-end. (renae.dyer@wsj.com)
1024 GMT - Eurozone consumer-price growth in May was largely driven by a surprisingly sharp jump in core inflation, Vincent Stamer at Commerzbank says in a note. Inflation is likely to settle just above 3%, while the core rate could rise significantly in the second half, with surveys showing that companies intend to pass on costs to consumers, he says. Inflation rose to 3.2% in May, from 3.0% a month prior. Core inflation jumped to 2.5% from 2.2%. This is possibly an early sign of the indirect effects of high oil prices, Stamer says. "National data suggest that transportation prices, such as airline tickets, have become more expensive." The ECB will likely raise rates next week, and then once more in the third quarter, Stamer says. (don.forbes@wsj.com)
1016 GMT - Uncertainty is increasing, making it difficult to form a decisive, direction-setting position in duration, Amundi Investment Institute's Vincent Mortier and Monica Defend say in a note. Duration measures the sensitivity of bonds to changes in interest rates. "We have become somewhat cautious with U.S. duration, given that growth remains robust and fiscal risks persist," they say. In Europe, weaker growth and a cautious European Central Bank are making short- and medium-term bonds attractive, although Amundi remains cautious towards the long end. (emese.bartha@wsj.com)
1015 GMT - Eurozone inflation rising to 3.2% in May builds pressure on the European Central Bank to raise interest rates next week, Joe Nellis at MHA says in a note. "Underlying price pressures remain strong, with service inflation and wage growth persisting, businesses passing on costs, and global instability driving up energy and transport costs," he says. Prior to the war, markets had expected that the ECB would cut rates to support a sluggish economy. "The fact that even a small increase is causing concern about the eurozone's outlook says a great deal about the economy's underlying structural problems." The ECB is likely to hike next week, but the outlook beyond that is uncertain given the clouds hanging over businesses, households and governments, Nellis says. (don.forbes@wsj.com)
1014 GMT - Net new mortgage approvals in the U.K. climbed to 65,945 in April, from 63,979 in March, stronger the consensus forecast of 61,600 from economists in a WSJ poll. "Households have likely brought forward house purchases ahead of feared further mortgage rate rises," Pantheon's Rob Wood says in a note. Investors fully price in the possibility of one quarter-point interest-rate rise by the Bank of England in 2026 and a 60% probability of a second increase, LSEG data show. (miriam.mukuru@wsj.com)
1003 GMT - The rates market is likely to react more than equities to a ceasefire in the Middle East, Jefferies' Mohit Kumar says in a note. U.S. stocks have risen sharply recently and Jefferies' positioning indicators have suggested that long U.S. equity positions are "getting crowded," the global economist says. For bonds, markets have likely priced in too many rate increases and therefore have more scope to correct, Kumar says. "We see only one hike from the European Central Bank and none from the Federal Reserve or the Bank of England." Money markets price 61 basis points of rate hikes from the ECB this year, 39 basis points for the BOE and 16 basis points for the Fed, LSEG data show.(emese.bartha@wsj.com)
(END) Dow Jones Newswires
June 02, 2026 06:54 ET (10:54 GMT)
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