Shares nudge up, oil dips, with Mideast and central banks in focus
The escalation in the Middle East came just as Group of Seven leaders were gathering in Canada, with U.S. President Donald Trump's tariffs already straining ties.
Yet there was no sign of panic among investors as currency markets stayed calm and Wall Street stock futures firmed after an early dip.
Brent was last off 0.5% at $73.85 a barrel,, but last week's 13% surge means its inflationary pulse, if sustained, could make the Federal Reserve more nervous about giving too many hints at its Wednesday meeting about interest rate cuts later in the year.
Markets are still wagering on two easings by December, with a first move in September seen as most likely.
"The key is how much flexibility the Fed thinks it has, we've been pleasantly surprised we've not yet seen in inflationary pass-through from the tariffs," said Ben Laidler, head of equity strategy at Bradesco BBI.
"The situation in the Middle East is the major issue of the day. The message from the market is that it isn't too afraid, but it does turn what was already going to be a busy week into a frenetic one, and that has a lot of people on the sidelines."
Data on U.S. retail sales on Tuesday will also be a hurdle, as a pullback in autos could drag the headline down even as core sales edge higher. A market holiday on Thursday means weekly jobless claims figures are out on Wednesday.
For now, investors were waiting on developments and MSCI's all-country world share index gained 0.2%, to sit a touch below last week's record high.
Europe's STOXX 600 rose 0.3% and S&P 500 futures rose 0.5%.
Earlier in the day, Chinese blue chips added 0.24%, and Hong Kong gained 0.7% as data showed Chinese retail sales rose 6.4% in May to handily top forecasts, while industrial output was in line with expectations.
EXPOSED TO OIL
In currency markets, the dollar gave back of some of last Friday's gains against European currencies - the euro was up 0.3% at $1.1582 - and held steady on the Japanese yen at 144.10.
The spike in oil prices is a negative for the yen and euro at the margin as both Japan and the EU are major importers of energy, while the United States is an exporter.
Currencies from oil exporters Norway and Canada both benefited, with the Norwegian crown hitting its highest since early 2023.
"We should expect that economies with a positive energy trade balance should see their currencies benefiting from the shock to oil prices," noted analysts at Deutsche Bank.
"It's notable the dollar is in this category, highlighting how the U.S. has moved from a net energy-importer to a net exporter in recent years."
Central banks in Norway and Sweden meet this week, with the latter thought likely to trim rates.
The Swiss National Bank meets on Thursday and is considered certain to cut by at least a quarter point to take rates to zero, with some chance it may go negative given the strength of the Swiss franc.
The Bank of Japan holds a policy meeting on Tuesday and is widely expected to hold rates at 0.5%, while leaving open the possibility of tightening later in the year.
There is also speculation it could consider slowing the rundown of its government bond holdings from next fiscal year.
Government bond yields nudged higher around the world. The U.S. 10-year Treasury yield was last up 1 bp at 4.44% Germany's 10-year Bund yield was up nearly 3 bps at 2.56%.
The calmer mood across markets saw some of gold's safe-haven bid reverse and it was down 0.55% at $3,413 an ounce..
(Reporting by Wayne Cole; Editing by Sam Holmes and Alex Richardson)
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