US equity futures jumped and global stocks rose to record highs as crude oil fell after officials signaled - once again - that the US was nearing a deal with Iran to reopen the Strait of Hormuz and restore oil flows. The dollar weakened while precious metals and crypto bounced from Friday's drop. While the US and Iran closed in on a deal, Trump said he won’t “rush” into an agreement. The deal is still a work in progress and the US is going to give diplomacy every chance to succeed, Secretary of State Marco Rubio said. S&P 500 futures squeezed higher by 0.9%, in line with Goldman expectations, while Nasdaq futs were up 1.3%, both printing in record territory as the market just can't get enough of news that "a deal is imminent." US cash markets are shut Monday for the Memorial Day holiday. The dollar retreated against all of its Group-of-10 peers.  Crude oil slumps more than 5%: WTI crude futures fall to around $91 and Brent contracts drop below $98 a barrel. Aussie tops G-10 leaderboard; euro and pound both add about 0.3%. Nikkei surges more than 3% as Japanese equities hit record highs, and Taiex also jumps about 3%. Mainland China indexes are all in the green. Hong Kong and South Korea are closed for holidays. T-note futures jump 20/32 to near 109-28. Australian curve bull flattens with 10-year yield down 5 bps. JGB futures rally as Japan’s long-end yields slide. Gold rises more than $50 to near $4,560 and silver surges 3%.In short: global euphoria. 

Consistent The MSCI All Country World Index, the broadest measure of global equities, rose 0.4% to an all-time high closing level. Europe’s benchmark Stoxx 600 gained for a sixth straight session to the highest intraday level since the outbreak of the Iran war. Trading volumes were light, with a number of markets including the UK, Norway and Denmark closed for holidays. 

Brent tumbled almost 6% to below $100 a barrel amid optimism a deal will help restore the flow of oil through the vital Middle East artery.

Senior US officials said Sunday that the US and Iran were nearing an agreement that would reopen the Strait of Hormuz, though final approval from both sides could still take several days. Iran said a deal isn’t imminent, though there is consensus on a number of issues. While the US and Iran closed in on a deal, President Donald Trump said he won’t “rush” into an agreement. The deal is still a work in progress and the US is going to give diplomacy every chance to succeed, Secretary of State Marco Rubio said.

Similarly, Iran’s foreign ministry spokesperson says they have reached a framework with the US but nobody can say that an agreement between the two sides is imminent, Reuters reports. he adds that Iran will not collect tolls on the Strait of Hormuz but it's normal that services provided would require a price.

In other words, we don't have a deal as the key sticking points remain unresolved (and unresolcable) but the market is acting as if there is a deal, as has been the case since April. 

“After today’s market moves, the most likely scenario already appears to be largely priced in,” said Roberto Scholtes Ruiz, head of strategy at Singular Bank. “Therefore, I would expect some ‘sell the news’ dynamics once a deal is finally reached, and I would refrain from adding exposure to equities until yield curves move lower.”

The improvement in risk sentiment follows weeks of stalemate between the US and Iran after several previous efforts to strike a deal. Global equities have since surged on optimism that Middle East tensions may ease and on renewed enthusiasm for the artificial intelligence trade, while elevated oil prices and higher inflation pushed bond yields to multi-year highs.

“A clear FOMO factor contributes to unexpectedly strong global risk appetite: investors don’t want to be left out if the Iran war comes to an end while the AI theme continues to lift the stock market,” said Dana Malas, a strategist at SEB.

Traders also remain focused on inflation. They have fully priced in a Federal Reserve rate hike by year-end, underscoring expectations that the US central bank chair Kevin Warsh will need to act swiftly. Later this week, US Personal Consumption Expenditures data and inflation readings across Europe will offer clues on price pressures and the direction of interest rates.

Warsh, who has promised the biggest shakeup in decades at the US central bank, was sworn into office Friday. Trump stressed that he wants Warsh to independently lead the Fed, as he looked to downplay investor concern that he would pressure the new central bank chief on policy decisions. The Fed may have enough reason to justify an interest rate cut rather than a hike under new chairman Warsh, according to BlackRock Inc. 

Europe is picking up where it left off last week after Trump talked up the prospects of a peace deal over the weekend. SocGen’s strategists reckon “muscle memory” built in previous crises is encouraging investors to buy dips and BofA’s say London’s buyside is “long and paranoid.”
Euro Stoxx 600 futures are 1.1% higher amid lower trade volume as markets including London are closed for a holiday, with Denmark, Norway and Switzerland, among others, also shut. Cash trading in the US will also be closed for Memorial Day. Among individual stock moves in Europe, Delivery Hero SE jumped more than 10% after it received a take-over offer from Uber Technologies Inc. in a deal that would value the German delivery company at about €10 billion ($11.6 billion).  Here are the biggest movers Monday:

• Delivery Hero shares rise 8.2% to €36.3 on Tradegate, above Uber’s indicative offer of €33 per share, signaling that some investors believe a higher takeover price is possible
• Nexi shares rose as much as 5.5% after Italy’s state lender Cassa Depositi e Prestiti said it plans to raise its stake in the payments company to as much as 29.9%, tightening its grip on the Italian payments group
• Kinnevik gains as much as 4.7% after the struggling Swedish investment group appointed the former finance boss of the Wallenberg family’s main holding company as its new chief executive officer
• Hexagon gains as much as 2.3% after being upgraded to buy from neutral at SB1 Markets, with the broker saying the Swedish industrial technology group is an attractive investment after its upcoming spin-off of subsidiary Octave
• Kambi shares advance as much as 10% after the Swedish sports betting services firm’s CEO Werner Becher bought 20,900 shares in the company at SEK156 per share, representing a 3% premium versus Friday’s close.
• The Stoxx 600 energy sector is the worst-performer on Monday after oil declined as senior US officials gave further, positive signals on progress toward a deal with Iran to reopen the Strait of Hormuz, while airline and travel stocks outperform

Earlier in the session,  Asian stocks rose for a third straight session as expectations over AI-driven revenue bolstered tech shares, while signs of a potential US-Iran deal buoyed risk appetite. The MSCI Asia Pacific Index climbed as much as 1.5%, with TSMC, MediaTek and Delta Electronics providing the biggest support. A sub-gauge of information technology jumped to a record high. Taiwan and Japan led gains, though markets in Hong Kong and South Korea are closed for Buddha’s Birthday.

Sustained optimism around artificial intelligence and semiconductor demand continued to underpin sentiment across the region after upbeat earnings. Japan’s component makers including Taiyo Yuden surged, while Chinese semiconductor stocks also gained after Huawei Technologies touted a potential breakthrough in making advanced chips.

“The kind of near-term obsession with AI has really focused people much more heavily on Taiwan and South Korea,” Alison Shimada, senior portfolio manager at Allspring Global Investments, said on Bloomberg TV. At some point investors may take profit and rotate into markets like China and India selectively, she added.

China’s CSI 300 Index rose 1.6% amid expectations Beijing’s crackdown on cross-border trading would direct flows into domestic equities. Citic Securities said the move may hit as much as $32 billion of assets in Hong Kong, but said the impact is likely to be manageable.  Chinese coal mining stocks rose after a deadly accident in Shanxi province raised concerns about possible supply disruptions. 

Elsewhere, as reported last week, China launched an unprecedented campaign against illegal cross-border trading to stem capital outflows, threatening severe penalties against popular brokers and ordering non-compliant accounts to be liquidated within two years.

Top Overnight News

• Iran Talks Bog Down Over Nuclear Program, Sanctions Relief: WSJ
• US, Iran inch toward deal as gaps remain on uranium, sanctions: BBG
• Iran’s foreign ministry spokesperson says they have reached a framework with the US but nobody can say that an agreement between the two sides is imminent; Iran will not collect tolls on the Strait of Hormuz but it's normal that services provided would require a price: RTRS
• Secretary of State Rubio says Iran deal is still a work in progress: BBG
• Iran's top envoys discussing potential peace deal with Qatar prime minister, official says: RTRS
• Oil Slides as Ships Move Toward Hormuz: WSJ
• Hassett says ending Iran war may create room for Fed rate cut: BBG
• Pope urges AI regulation, apologizes for transatlantic slavery: RTRS
• Pope Leo Compares AI Threat to Biblical ‘Tower of Babel’: WSJ
• ECB likely to revise its inflation outlook in June, Lagarde says: BBG
• Uganda confirms two more Ebola cases, taking total to seven: RTRS
• Huawei Says It Has Workaround to Match Leading Chips: WSJ
• Meet Mark Zuckerberg’s Right-Hand Man Who’s Unleashing AI at Meta: WSJ
• Strategists warn yields to stay high even if Iran war ends: BBG
• Former SNP chief pleads guilty to embezzling $540,000: RTRS
• Pakistan Shi'ites deported from UAE return to lost jobs, frozen savings: RTRS

Iran War News

• US President Trump posted on Saturday that an agreement has largely been negotiated, subject to finalisation between the US, Iran and various Middle Eastern countries, while the final aspects and details of the deal were being discussed, and will be announced shortly. Trump stated in addition to many other elements of the agreement, the Strait of Hormuz will be reopened.
• US President Trump posted on Sunday that negotiations are proceeding in an orderly and constructive manner, while he informed representatives not to rush into a deal and that time is on their side. Trump stated the blockade will remain in full force and effect until an agreement is reached, certified, and signed, and that both sides must take their time and get it right.
• US President Trump posted on Sunday “If I make a deal with Iran, it will be a good and proper one, not like the one made by Obama, which gave Iran massive amounts of CASH, and a clear and open path to a Nuclear Weapon. Our deal is the exact opposite, but nobody has seen it, or knows what it is. It isn’t even fully negotiated yet.”
• US President Trump convened a meeting with his senior national security team on Friday morning regarding the war with Iran, according to Axios's Ravid citing two US officials, while the sources stated that Trump was seriously considering launching new strikes against Iran, barring a last-minute breakthrough in negotiations.
• US President Trump posted a generated image of a strike on Iranian-flagged vessels with the caption ‘Adios’.
• US Secretary of State Rubio said there may be “some good news” regarding the blocked Strait of Hormuz in the coming hours, but not final news, while he also commented that a nuclear deal cannot be reached with Iran in 72 hours and that nuclear negotiations are very technical issues that cannot be done in 72 hours ‘on the back of a napkin’. Rubio separately commented that President Trump is not going to make a bad deal and that it takes time as they have to wait to hear back from Iran, while he suggested that signing a deal with Iran is still possible on Monday and that they will either a good agreement with Iran or will deal with the matter in another way, but will give diplomacy every chance to succeed before exploring alternatives.
• US and Iran were reportedly close to signing an agreement involving a 60-day ceasefire extension, which could be extended by mutual consent, according to Axios. Furthermore, a US official said Trump’s key principle is “relief for performance”, while Iran wanted funds unfrozen immediately and permanent sanctions relief, but the US position is that this would only follow tangible concessions. It was also reported that US President Trump told leaders of Arab and Muslim countries during a Saturday conference call that if a deal to end the Iran war is achieved, he wants their nations to join the Abraham Accords and sign peace agreements with Israel, according to Axios's Ravid.
• US senior official said the White House doesn’t expect an agreement to end the war with Iran on Sunday and believes it could take several days for the deal’s approval by Iran’s leadership, according to Axios.
• US senior officials said the naval blockade will only be lifted after Iran opens the Strait of Hormuz, and no funds will be released until enriched uranium is handed over, while it was stated that there is agreement on 95% of a deal, but it needs to be drafted. Furthermore, difficulties remained regarding issues, and it is estimated to take 5-6 days to receive approval from Supreme Leader Khamenei, with any further changes also requiring his consent, according to Jerusalem Post’s Amichai Stein.
• US and Iran are said to have agreed in principle to a preliminary deal aimed at ending the war, which would reopen the Strait of Hormuz and limit Iran’s uranium stockpile, but remains subject to final approval, which is expected to take several days, according to NYT. A separate report also noted that the US understands that Iran agrees in principle to dispose of uranium stockpile and that the Supreme Leader endorses the broad template, although there was no immediate confirmation from Iran or elaboration on what an "in principle" agreement meant, according to Sky News.
• US officials stated that Iranian negotiators are facing difficulty in communicating with Supreme Leader Khamenei, which is the reason for the delay in the agreement, according to CBS.
• Iranian President Pezeshkian said their negotiating team will not compromise when it comes to the country’s honour or dignity, while he said they are ready to reassure the world that they are not seeking nuclear weapons.
• Iranian source said Iran has no optimism towards the US and that there is no final deal yet, with challenges remaining. The source also stated that Iran rejects linking frozen assets to nuclear stockpiles and has not made any new nuclear commitments, while Iran demands the release of frozen assets as a condition for a deal and will monitor US actions if a deal is reached, according to Tasnim. Furthermore, it was reported that there is still the possibility an agreement may be cancelled.
• Iran said on Friday that 'no deal' will reach a conclusion if the US demands enriched uranium handover. It was also reported that an Iranian official source said that stopping the war on all fronts is the essential prerequisite for discussing any future negotiations, while the source stated there was no final agreement yet, and work is underway to narrow the gap between Tehran and Washington, according to Al Jazeera.
• IRGC advisor said their enemy knows that if it wants to make a mistake, it will receive an irreparable blow and that Iran would retaliate 10-fold against the US. It was separately reported that Iran shot down an Israeli surveillance drone, according to Mehr News Agency.
• Iran’s Deputy Foreign Minister for Legal and International Affairs Kazem Gharibabadi said Iran and Oman discussed Hormuz maritime rules amid ongoing US talks.
• Iranian officials said major disagreements remain, especially over the status of the Strait of Hormuz, Iran's nuclear program and conflicts involving Tehran-backed groups in Lebanon, according to Al Jazeera.
• Iranian Foreign Ministry spokesperson said on Friday that the differences between Iran and the US are so deep and numerous that it cannot be said that they will definitely reach a conclusion with several visits or negotiations within a few weeks, according to Fars.
• Israeli PM Netanyahu told US President Trump that Israel will maintain the freedom to act in Lebanon, while Netanyahu said that Trump agrees that the Iran deal must remove the nuclear threat.
• Israel conducted a strike on Arzoun in the city of Tyre, southern Lebanon.
• Hezbollah deputy leader Naim Qassem said any attempt to disarm Hezbollah would lead to its elimination and the gradual Israeli occupation of Lebanon, while he added that Hezbollah will remain on the battlefield until an Israeli withdrawal.
• A drone attack targeted the Pehmerga command centre in Salaymaniyah, Iraq, according to IRNA.

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