US Futures Rise as Iran Ceasefire Expiry Tests 27% Hike Odds

U.S. stock futures were mostly higher as investors braced for the Iran ceasefire expiration and a data-heavy week of Fed minutes and retail earnings.

"Wednesday's FOMC minutes will be closely examined for the extent of disagreement within the Fed," said Daniela Hathorn, senior market analyst at Capital.com.

The Federal Open Market Committee voted 9-3 last month to hold the federal funds rate in a range between 3.5 percent and 3.75 percent, with three members favoring an increase to tame above-target inflation. Money markets price only a 27 percent chance of a 25 basis-point rate increase next month, with a hike not fully priced until early next year, LSEG data showed.

The stakes are elevated: Walmart and Home Depot report second-quarter earnings this week, offering clues on U.S. consumer spending, while the Iran ceasefire expiration could push oil prices higher and test risk appetite across global markets.

The Iran ceasefire, brokered to de-escalate tensions in the Middle East, is set to expire as negotiations over the Strait of Hormuz remain unresolved. Oil prices have already climbed as the stalemate between the U.S. and Iran over the waterway has sent energy costs higher, according to Investec analyst Lottie Gosling. The strait handles roughly a fifth of global oil consumption, making any disruption a direct threat to inflation and growth.

Fed Minutes to Test Rate Path

The minutes, due Wednesday, will be scrutinized for signals on whether the Fed's patient stance can hold. Recent weaker-than-expected U.S. jobs data and a slight reduction in inflation have caused investors to pare back expectations for when the Fed will hike rates. Hathorn noted that "relatively benign" CPI inflation strengthens the argument that the Fed "can afford to remain patient," though "the inflation story isn't entirely comfortable" with CPI above target and longer-dated Treasury yields elevated.

Retail Earnings to Gauge Consumer Health

Walmart and Home Depot report quarterly results this week, providing a read on U.S. consumer spending at a time when elevated energy prices and geopolitical uncertainty weigh on household budgets. The reports come as flash purchasing managers' surveys for August are due Friday, offering updated information on private-sector activity.

Across Asia, China releases July industrial production, retail sales, fixed-asset investment and housing prices Monday. Economists expect weakness across most indicators, with a Wall Street Journal poll projecting industrial production growth slowing to 4.8 percent year-over-year from 5.3 percent in June. Retail sales could offer a bright spot, with the poll guiding for a rise of 1.4 percent versus 1.0 percent the prior month.

This article is for informational purposes only and does not constitute investment advice.