June S&P 500 E-Mini futures (ESM26) are trending up +0.02% this morning, swinging between gains and losses as optimism over the de-escalation of the Middle East conflict wanes.

Investors continue to navigate a flood of headlines surrounding the Middle East conflict after President Trump signaled a potential end to hostilities on Monday following what he described as productive discussions. Fragile optimism over a potential easing of tensions gave way to renewed caution after the Wall Street Journal reported that U.S. allies in the Persian Gulf are moving closer to joining the fight against Tehran. Also, Iran’s deputy speaker dismissed the possibility of talks with the U.S., echoing similar remarks from other officials in the regime.

Tensions remained elevated in the Middle East. Iran carried out overnight missile and drone strikes on the Israeli cities of Eilat, Dimona, and Tel Aviv, as well as on U.S. bases in the Middle East. At the same time, the Fars news agency reported U.S.-Israeli strikes that damaged a gas pressure-regulation facility and an administrative building in Isfahan. The price of WTI crude rose over +2% on Tuesday, while Treasury yields rose across the curve, with the ten-year rate climbing two basis points to 4.37%.

Market participants are also bracing for U.S. business activity data.

In yesterday’s trading session, Wall Street’s main stock indexes closed sharply higher after President Trump said the U.S. would postpone attacks on Iranian energy infrastructure for five days. The Magnificent Seven stocks climbed, with Tesla (TSLA) advancing over +3% and Amazon.com (AMZN) rising more than +2%. Also, chip and AI-infrastructure stocks gained ground, with ASML Holding N.V. (ASML) and Broadcom (AVGO) rising over +3%. In addition, travel stocks rallied amid a slump in oil prices, with Norwegian Cruise Line Holdings (NCLH) surging more than +6% and Carnival (CCL) climbing over +5%. On the bearish side, Fair Isaac (FICO) slid more than -5% after Politico reported that Republican Senator Josh Hawley sent a letter to the company stating his intention to investigate its pricing practices in the mortgage credit scoring market.

“The market woke up to some potentially good news. But follow-through on any relief rally will likely require tangible follow-through on the geopolitical front. We’re still living in a headline-driven market,” said Chris Larkin at E*Trade from Morgan Stanley.

Economic data released on Monday showed that U.S. construction spending unexpectedly fell -0.3% m/m in January, weaker than expectations of +0.1% m/m.

Fed Governor Stephen Miran said on Monday that the central bank should not base policy decisions on short-term factors tied to the U.S. and Israel’s war in Iran. “We should wait for all the information to come in before really changing our outlook,” Miran said. Separately, Chicago Fed President Austan Goolsbee said he could see the central bank either raising interest rates or resuming rate cuts, depending on how the Middle East conflict plays out.

U.S. rate futures have priced in a 91.7% probability of no rate change and an 8.3% chance of a 25 basis point rate hike at April’s monetary policy meeting.

Meanwhile, Goldman Sachs said on Monday that the spike in oil and gas prices has increased the probability of a recession in the U.S. economy over the next 12 months to 30%, up 5 percentage points from previous estimates.

Today, investors will focus on preliminary U.S. purchasing managers’ surveys, set to be released in a couple of hours. The surveys will provide an early read on how businesses have held up during the Middle East conflict that has triggered a surge in oil prices. Economists expect the March S&P Global Manufacturing PMI to be 51.5 and the S&P Global Services PMI to be 52.0, compared to the previous values of 51.6 and 51.7, respectively.

U.S. Unit Labor Costs and Nonfarm Productivity data will also be closely monitored today. Economists forecast final Q4 Unit Labor Costs to rise +3.6% q/q and Nonfarm Productivity to rise +1.9% q/q, compared to the revised third-quarter numbers of -1.8% q/q and +5.2% q/q, respectively.

The U.S. Richmond Fed Manufacturing Index will be released today as well. Economists foresee this figure coming in at -8 in March, compared to the previous value of -10.

In addition, market participants will be anticipating a speech from Fed Governor Michael Barr.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.37%, up +0.41%.

The Euro Stoxx 50 Index is down -0.54% this morning as the previous session’s rebound, fueled by President Trump’s more conciliatory remarks on the Iran war, faltered, with disappointing PMI data from the region further dampening sentiment. Iran carried on with strikes against U.S. assets in the Gulf, while Israel launched new attacks on Iran and Lebanon. Energy-sensitive industrial and construction stocks fell on Tuesday as oil prices rebounded after a -10% drop in the previous session. Bank stocks also slumped. A survey released on Tuesday showed that Eurozone private sector growth slowed markedly in March as the Middle East conflict pushed input costs to their highest level in more than three years and sparked the worst supply chain disruptions since mid-2022. “The flash Eurozone PMI is ringing stagflation alarm bells as the war in the Middle East drives prices sharply higher while stifling growth,” said Chris Williamson, chief business economist at S&P Global Market Intelligence. Meanwhile, the European Union and Australia reached an agreement on a free-trade deal and security partnership on Tuesday. “We are sending a strong signal to the rest of the world that friendship and cooperation are what matter most in times of turbulence,” European Commission President Ursula von der Leyen said in a statement. In corporate news, Puig Brands SA (PUIG.E.DX) jumped over +12% after Estée Lauder and the Spanish beauty group announced they were in discussions over a possible merger.

Eurozone’s Composite PMI (preliminary), Eurozone’s Manufacturing PMI (preliminary), and Eurozone’s Services PMI (preliminary) data were released today.

Eurozone’s March Composite PMI has been reported at 50.5, weaker than expectations of 51.0.

Eurozone’s March Manufacturing PMI came in at 51.4, stronger than expectations of 49.4.

Eurozone’s March Services PMI arrived at 50.1, weaker than expectations of 51.1.

Asian stock markets today closed in the green. China’s Shanghai Composite Index (SHCOMP) closed up +1.78%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.43%.

China’s Shanghai Composite Index closed higher today, snapping a three-session losing streak as hopes of a potential de-escalation in the Middle East conflict boosted risk appetite. U.S. President Donald Trump said on Monday the U.S. military would delay strikes on Iranian energy infrastructure for five days because of what he described as “productive talks” with unidentified Iranian officials. The news helped the benchmark index regain part of Monday’s more than -3% slide, which marked its steepest decline since the global tariff shock about a year ago. Financial stocks were among the biggest gainers on Tuesday. Non-ferrous metal stocks also climbed. At the same time, energy stocks slumped. Meanwhile, Tuesday’s optimism was tempered with caution as Iran denied engaging in negotiations with the U.S. and launched multiple waves of missiles at Israel. In corporate news, WuXi AppTec surged over +10% in Hong Kong after the pharmaceutical company posted strong full-year results. Also, Alibaba Group rose nearly +3% in Hong Kong after local media reported that the company unveiled its next-generation XuanTie C950 5-nanometer processor at an internal conference. Investor attention this week is on China’s industrial profit data for the January-February period and whether it is consistent with stronger-than-expected activity data released earlier this month. “Markets will watch for any improvement from the sluggish 0.6% year-on-year growth rate in 2025,” ING economists said. 

Japan’s Nikkei 225 Stock Index closed higher today, snapping a two-session losing streak as sentiment improved after President Trump said the U.S. military would delay strikes on Iranian energy infrastructure for five days. Gains were broad-based on Tuesday, with real estate, industrial, and energy stocks leading the rally. However, the benchmark index closed well below its session highs as uncertainty surrounding the Middle East conflict weighed. Iran denied direct negotiations with the U.S., while Saudi Arabia and the United Arab Emirates have reportedly moved closer to entering the war. Japanese shares are likely to remain volatile, as the nation’s market is highly sensitive to oil price swings, which directly impact the Asian economy and corporate earnings. Meanwhile, data released on Tuesday showed that Japan’s core consumer inflation eased below the Bank of Japan’s 2% target in February for the first time in nearly four years, as government fuel subsidies countered rising import costs. However, economists said the cooldown appears temporary, and with the Middle East conflict clouding the outlook, the case for further rate hikes from the BOJ remains strong. Separately, a survey showed that Japan’s manufacturing sector activity slowed in March, as orders and output eased in an early sign of the Middle East conflict’s impact on Japanese businesses. Still, ING’s Min Joo Kang noted that the headline PMI figure remained above 50, suggesting that businesses view geopolitical risks as temporary. In corporate news, Tokio Marine Holdings’ shares jumped over +17% to their daily upper limit after Berkshire Hathaway said it was acquiring a 2.49% stake in the insurer for about $1.8 billion as part of a new strategic partnership. At the same time, Nintendo slid more than -4% after Bloomberg reported that the game maker would cut Switch 2 production by over 30% this quarter due to weak U.S. sales. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed down -11.19% to 36.35.

The Japanese February National Core CPI rose +1.6% y/y, weaker than expectations of +1.7% y/y.

The Japanese March S&P Global Manufacturing PMI (preliminary) stood at 51.4, weaker than expectations of 53.2.

Pre-Market U.S. Stock Movers

Jefferies Financial Group (JEF) surged over +9% in pre-market trading after the Financial Times reported that Japan’s Sumitomo Mitsui Financial Group was working on plans for a possible takeover of the investment bank.

Gilead Sciences (GILD) advanced over +3% in pre-market trading after agreeing to acquire privately held biotech Ouro Medicines.

CoreWeave (CRWV) gained more than +2% in pre-market trading after BofA reinstated coverage of the stock with a Buy rating, up from a prior Neutral rating, with a $100 price target.

Ralph Lauren (RL) rose over +1% in pre-market trading after Citi upgraded the stock to Buy from Neutral with a $400 price target.

Apollo Global Management (APO) fell more than -1% in pre-market trading after a regulatory filing revealed that one of the company’s private credit funds limited withdrawals to its stated 5% cap after receiving redemption requests for 11.2% of its shares.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Tuesday - March 24th

GameStop (GME), Core & Main (CNM), AAR Corp. (AIR), KB Home (KBH), Worthington Enterprises (WOR), Braze (BRZE), Concentrix (CNXC), Cadeler (CDLR), Elemental Royalty (ELE), Vertical Aerospace (EVTL), Velo3D (VELO).

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