A look at the day ahead in European and global markets

By Tom Westbrook, Deputy Financial Markets Editor

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The session is the first buying day for the quarter ahead, given that trades settle the following day.

In the quarter closing out, the biggest oil supply shock on record ‌has hardly left a blemish on financial markets, as demand cuts in China, alternative shipping routes and producers plugged the crude shortfall.

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, June 29, 2026. REUTERS/staff

Oil prices have fallen back to levels before the U.S.-Israeli-Iran conflict began at the end of February, and skirmishes straining the ceasefire are drawing little reaction.

Even the bond market seems to be moving on. Traders are sticking with expectations for modest ⁠U.S. rate hikes, though on the basis of strong U.S. growth rather than runaway inflation.

Bonds were mostly unmoved by the U.S. Supreme Court's refusal, as foreshadowed in January, to let President Donald Trump fire Fed governor Lisa Cook.

And the AI rally has run on unhindered, driving gains of 100% in the first half for South Korea's KOSPI index and a record quarterly rise of about 36% for Japan's Nikkei.

Flows have been counterintuitive, with foreign cash streaming out from South Korea and dragging down the won as investors take profit and rebalance through the rally, leaving retail investors to chase the ‌gains.

Graphics are produced by Reuters

Some ⁠recent speed wobbles may turn market focus to a broader range of rising but less red-hot stocks in Europe, where the STOXX index is up about 9% for the quarter, and Asia, where China's mainland blue chips are up 10%.

And the yen is on the ropes, along with the won, thanks to the markets' ⁠view that Japan is lagging behind a global move higher in interest rates. It crossed 162 to the dollar for the first time since 1986 in the Asia session and the risk of intervention is higher and ⁠higher, traders say, the nearer the rate nudges to 165.

German, French and Italian inflation readings are due and could show annual rates dropping and reinforce that rates can be on hold in ⁠Europe for some time.

The European Central Bank's Isabel Schnabel appears on a panel in Sintra, where Fed Chair Kevin Warsh is due on Wednesday.