Fed rate hike Wednesday odds rise as global stocks climb on Iran talks
Markets rose as U.S.-Iran talks resumed, but CME data showed traders cutting odds of a Fed hold before Wednesday’s decision.
By Daniel Okafor · Business Editor
3 min read
Global stocks rose Monday, while traders put higher odds on a fed rate hike Wednesday and watched renewed U.S.-Iran talks. The split matters for markets: easing oil prices helped risk appetite, but a surprise move by the Federal Reserve would raise borrowing costs.
Fortune reported that S&P 500 futures were up 0.95% in early trading after the index gained 0.05% in its previous session. In Europe, the Stoxx 600 rose 0.68%, while the U.K.’s FTSE 100 added 0.44% before lunch.
Asian indexes also advanced, according to Fortune. South Korea’s KOSPI gained 0.97%, Japan’s Nikkei 225 rose 0.5%, India’s Nifty 50 added 1%, and China’s CSI 300 climbed 1.15%.
Brent crude traded at $89 a barrel, Fortune reported, after rising above $100 last week. Bitcoin was at $65,000.
Will the Fed raise rates on Wednesday?
The CME FedWatch tool showed traders had become less confident that Federal Reserve Chair Kevin Warsh and the Federal Open Market Committee would leave rates unchanged. Fortune reported that in May, traders saw a 99% chance the base interest rate would stay at 3.5%; by Monday, that probability had fallen to 62%, while 33% expected an increase.
Jessica Rindels of Goldman Sachs said in a July 24 note that five FOMC members had made comments since the prior meeting indicating they were open to higher rates, according to Fortune. Bank of America’s Aditya Bhave said the firm’s base case was still no move in July at 3.5% to 3.75%, but that the oil-price jump had made the decision close.
Bhave said Warsh faced competing risks, according to Fortune: holding rates could raise questions about the Fed’s inflation stance, while raising them would conflict with his approach of looking past supply shocks. Bhave also said Warsh had enough votes to decide either way.
What is driving the market rally?
Investors also reacted to a pause in fighting between the U.S. and Iran. U.S. Ambassador to the United Nations Mike Waltz said the U.S. stopped attacks on Iran for a second straight night to allow peace talks to proceed, according to the BBC. Waltz denied that the pause was tied to dwindling U.S. missile supplies, and Fortune reported that Iran had also halted strikes.
The Financial Times reported that the talks centered on whether Iran would allow a set number of ships to pass through the Strait of Hormuz using a southern route near Oman, an area controlled by the U.S. Navy. The Strait of Hormuz is a key passage for energy shipments, so disruptions there can affect oil prices and inflation expectations.
Axios reported that Adm. Brad Cooper, the top U.S. commander in the Middle East, recommended ending the bombing campaign around the Strait of Hormuz because it had reached the limit of its effectiveness, citing two people familiar with his view. Axios also reported that the war had sharply reduced Iran’s ability to threaten shipping, though Centcom had not destroyed the remaining 20% of sites it had identified as bombing targets.
The Wall Street Journal reported that White House officials were debating how many missiles the U.S. still had available and when to use them. Fortune also reported that President Donald Trump spent hours posting AI-generated images of himself on Truth Social, including images showing him bombing Iranian ships.
Chip debut adds to China market gains
Chinese memory-chip maker CXMT surged in its first day of trading, closing up 465.82%, Fortune reported. At $484 billion, the company briefly became China’s largest company by market value, according to the Wall Street Journal.
The Wall Street Journal reported that CXMT competes with Micron, SK Hynix and Samsung, and supplies Apple. The strong debut added another market driver as global equities rose.
Investor enthusiasm was not uniform. Bespoke Investment Group said bullish sentiment among individual investors fell 15.3 percentage points to 29.6%, the lowest level of the year and the largest weekly drop since 2021, according to Fortune.
This story draws on original reporting from Fortune.