Post-Deal Optimism Holding
June 16, 2026
Much still remains unknown regarding the future evolution of U.S.-Iran talks, but yesterday’s rally in equities and decline of long-term interest rates following the announced interim deal has persisted. Stock markets this Tuesday rose 4.1% in Indonesia, 2.1% in South Korea, 0.9% in Taiwan but just 0.1% in Japan where Bank of Japan officials hiked the short-term interest rate target for the first time in six months. In Europe, share price increases have been as much as 1.3% so far in Italy’s case today and range from 0.4-0.7% in Germany, France, Spain and Great Britain. U.S. stock futures are 0.1-0.3% firmer. Ten-year sovereign debt yields have dropped by four basis points in France, Italy and Spain, three bps in the United States, Germany and United Kingdom.
The dollar is virtually unchanged for the most part including the yen despite the tightening of Japanese monetary policy. One change worth noting is a 0.3% rise of the South Korean won.
The cost of West Texas Intermediate oil continued to recede, sliding another 2.9% overnight to $78.39 per barrel currently. Prices for bitcoin and gold are 0.2% firmer.
The Bank of Japan Board’s 25-basis point interest rate hike had been anticipated. Governor Ueda was absent from the five hour nine minute monetary policy review over two days because he’s been hospitalized for an infected liver cyst. Deputy Governor Himino chaired the discussion, which ended with one dissent against the hike that was cast by Asada Toichiro. Although Japanese CPI inflation has slipped below 2.0%, a released statement warns,
The price pass-through stemming from the rise in crude oil prices has been progressing at a relatively fast pace in business-to-business transactions, which could spread to an increase in consumer prices across a wide range of items. Against this backdrop, taking into account that medium- to long-term inflation expectations have also continued to rise, there is a risk of underlying CPI inflation deviating upward to a level above the price stability target of 2 percent.
The BOJ statement projects that growth is likely to continue, albeit at a decelerated pace. The new policy rate will be at its highest level in almost 31 years, yet at only 1.0%, still low enough to encourage carry trades that weigh on the yen. From January 2017 until March 2024, the rate target had been at minus 0.1%.
The Reserve Bank of Australia‘s monthly policy review also wrapped up today and like the BOJ meeting produced the result that markets had been anticipating. Only in Australia’s case, that was a decision to leave the Official Cash Rate unchanged at 4.35%, and there were no dissents. Although CPI inflation exceeds the 2-3% target, officials feel that a trio of 25-basis point hikes in February, March and May have tightened financial conditions sufficiently to sit back and watch how the economy responds to those moves. Nevertheless,”the Board is focused on its mandate to deliver price stability and full employment. It will do what it considers necessary to achieve that outcome, including increasing the cash rate target further if required,” warns today’s statement.
China reported several economic data today. Despite a 5-month low in unemployment of 5.1%, the figures in their totality depict an economy that is underperforming expectations. Retail sales fell 0.4% on month and 0.6% on year in May, and the average 1.4% increase in the first five months of 2026 when compared to a year earlier was only have the 2.7% average increase in all of 2025. A 3.5% on-year drop in property prices matched April’s 11-month low. A 4.1% decline in fixed asset investment in January-May was twice as deep as presumed. While industrial production‘s 4.5% year-on-year advance in May slightly exceeded expectations, the pace when compared to a 5.9% increase in all of 2025 was down.
Investor sentiment in Germany and Euroland, according to the ZEW Institute June survey, rebounded more sharply than expected. At 10.5 in Germany and 9.5 in the whole euro area, the June readings were still well below pre-war levels of 59.3 and 40.8 back in January. Also and despite receding expected inflation, perceived current economic conditions in both Germany and Euroland worsened somewhat further in the latest survey compared to those in May.
Average hourly labor costs in Euroland were 3.2% higher in the first quarter than a year earlier.
The final estimate of Italian consumer price inflation in May matched the earlier estimate of a 0.4% monthly increase and a 32-month year-on-year high of 3.2%.
Producer prices in the Czech Republic dipped 0.1% on month in May but accelerated a half percentage point in the year-on-year comparison to a 7-month high of 1.5%. A 3.0% on-year drop in this year’s first month had constituted the lowest point in close to a decade.
South Korean import price inflation of 24.8% in May surpassed the 20% bar for a third straight month in contrast to a 0.9% on-year drop in January.
Turkish retail sales fell 1.7% in April and recorded their smallest year-on-year increase (11.4%) in 13 months.
The Reserve Bank of Zimbabwe‘s policy interest rate was cut to 30% from the 35% level that had prevailed since September 2024. CPI inflation of 4.4% in Zimbabwe now contrasts sharply with 95.8% last July.
U.S. import price inflation bottomed out at -6.1% in mid-2023 and hovered near zero percent from April 2025 through January 2026. Since just before the outbreak of the war with Iran, however, the 12-month change in import prices has risen at an accelerating rate, climbing from 1.0% in February to 4.2% by April and then jumping just as much one month later to a greater-than-forecast 6.7%. That level is the highest in nearly four years, representing gains of 45% in imported fuel and 3.7% in all other items collectively.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: Bank of Japan, Chinese retail sales and industrial production, German and Euroland ZEW expectations, Reserve Bank of Australia, U.S. import prices
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