16/06/2026
The rally in global stock markets has lost momentum with trading turning volatile. After climbing more than 1% for three consecutive trading days, the MSCI All Country World Index has entered a consolidation phase. Investors have paused to assess the sustainability of the market rebound driven by the prospective reopening of the Strait of Hormuz under the new US-Iran deal, while closely monitoring monetary policy decisions by the Bank of Japan (BOJ) and the Reserve Bank of Australia (RBA).
Major US equity benchmarks notched solid gains on Monday, with the S&P 500 rising 1.7% and the Nasdaq 100 surging 3.1%, before US stock index futures edged lower. In the commodity market, Brent crude oil tumbled below $83 per barrel, posting its largest drop in more than two weeks. The overall market showed divergent performance. The US dollar strengthened slightly, and the 10-year US Treasury bond price remained steady. Bitcoin fell by around 1%, while gold prices advanced. In the Asia-Pacific region, the Nikkei 225 rose 0.6% and the MSCI Asia Pacific Index gained 0.3%.
BOJ and RBA Policy Decisions Meet Market Expectations
The Bank of Japan raised its benchmark interest rate by 0.25 percentage points to 1%, hitting a new high since 1995. Despite the gradual tightening of borrowing costs, the yen remained under pressure against the US dollar, trimming its earlier gains, while Japanese bond yields surged sharply. The Nikkei 225 staged a rebound. Equity analysts noted that the widely expected rate hike eased market uncertainty significantly, lifting sentiment across Asian equities that had struggled in early trading.
For its part, the Reserve Bank of Australia kept its benchmark interest rate unchanged for the first time this year. The pause came as three previous rate hikes have started to weigh on domestic economic activity. The Australian dollar managed to hold its ground and pared losses following the policy announcement. The latest decisions by the BOJ and RBA kicked off a busy week of global central bank meetings, with the Federal Reserve’s policy outcome due for release on Wednesday.
Easing US-Iran Tensions Boost Market Sentiment
The rally in global stocks and bonds earlier this week was fueled by easing geopolitical tensions in the Middle East. A senior US official confirmed in a press call that US President Donald Trump and Vice President John D. Vance have signed a digital version of a memorandum of understanding with Iran. During a meeting with French President Emmanuel Macron, Trump stated that the Strait of Hormuz has been “partially reopened” and would be “fully reopened” by Friday.
As a critical global energy shipping lane, the Strait of Hormuz previously carried roughly one-fifth of the world’s oil supply before the regional conflict. The planned reopening has stoked market optimism that the geopolitical turmoil roiling global markets since late February may be coming to an end, driving down oil prices and improving overall risk appetite among investors. Market participants continue to track developments in the Middle East to verify the progress of the waterway’s reopening.
Global Central Bank Outlook: Most Institutions Set to Hold Rates Steady
Economists expect the US Federal Reserve to keep its benchmark interest rate within the range of 3.5% to 3.75% at the policy meeting, marking the first rate decision under newly appointed Fed Chair Kevin Walsh. Swap traders price in a less than 80% probability of a 25-basis-point rate hike by the Fed before December, pointing to a dovish near-term policy stance.
Market consensus also suggests that the Bank of England and the Swiss National Bank will maintain their current interest rates at their respective meetings this week. In contrast, the European Central Bank delivered its first rate hike in nearly three years last week. ECB President Christine Lagarde warned that inflationary pressures stemming from the Iran conflict are broadening out, with impacts extending far beyond energy prices.
China’s Economic Data Weakens, Underlining Lingering Recovery Risks
Economic data released on Tuesday revealed mounting downward pressure on China’s economy. Domestic consumer spending contracted for the first time since the outbreak of the COVID-19 pandemic, coupled with a slowdown in fixed-asset investment. Despite supportive factors including robust export performance and easing Iran-related geopolitical risks, China’s economy still faces prominent headwinds. Additionally, the decline in China’s housing prices accelerated in May, further highlighting weak domestic demand and persistent real estate sector pressures that continue to drag on economic recovery.
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