The Morning Edge: Powell Warns Tariffs May Fuel Inflation; US Intel Questions Impact Of Iran Strikes

QUICK SNAPSHOT
Global Sentiment: Risk-on
Factors:  Israel-Iran Ceasefire 

TODAY’S WATCHLIST
- US Fed Chair Powell testimony before Congress 
- RBI Monthly Bulletin 

THE BIG STORY
Federal Reserve Chair Jerome Powell told lawmakers on Tuesday that rising tariffs could begin pushing up inflation as early as this summer—just as the central bank weighs whether and when to cut interest rates. Testifying before the House Financial Services Committee, Powell pushed back against political pressure for immediate rate cuts, including calls from President Donald Trump. “I don’t think we need to be in any rush,” he said, citing a strong labour market and persistent uncertainty over the long-term impact of trade tensions. Powell also dismissed suggestions of committing to action at the Fed’s July meeting, signalling a wait-and-watch approach.

Meanwhile, a preliminary US intelligence assessment revealed that recent airstrikes on Iran’s nuclear sites launched with Israeli coordination and endorsed by Trump may have done less damage than claimed. The report, compiled by the Defence Intelligence Agency, suggests Iran’s core enrichment capabilities remain largely intact, with only temporary disruptions caused by blocked facility entrances. While the White House rejected the findings as “flat out wrong,” the revelation casts doubt on the effectiveness of the campaign, even as a fragile US-brokered ceasefire between Israel and Iran continues to hold.

DATA
US consumer confidence unexpectedly fell in June, with the Conference Board's index dropping 5.4 points to 93.0. The decline signals growing concerns about job availability and broader economic uncertainty, particularly as tariffs imposed by the Trump administration begin to weigh on sentiment. The deterioration was widespread cutting across age, income, and political lines with the sharpest drop seen among Republican respondents. This pullback follows a strong May reading and adds to signs that labour market momentum may be cooling.

WHAT HAPPENED OVERNIGHT
US stocks rallied on Tuesday, with all three major indexes rising over 1% as investors cheered a tentative ceasefire between Israel and Iran and digested Fed Chair Jerome Powell’s testimony for rate clues. Lower oil prices helped drag energy shares down, while airline stocks rebounded sharply on reduced geopolitical risk. The S&P 1500 Airlines index rose 2.4%, while defence names like Lockheed Martin and RTX Corp slipped over 2%. Among mega caps, Tesla lagged with a 2.4% loss. Crypto-linked stocks surged alongside bitcoin, with Coinbase up 12.1%. Broadcom jumped 3.9% to a record after an HSBC upgrade.

US Treasury yields declined on Tuesday, hitting a seven-week low, after Fed Chair Jerome Powell signalled openness to a July rate cut, saying "many paths are possible" for policy ahead. He highlighted the Fed’s readiness to act swiftly if labour market conditions deteriorate. As a result, markets are now fully pricing in two rate cuts by year-end, with a one-in-four chance of a third. The benchmark 10-year yield eased 3 basis points to 4.293%, while the 2-year yield, more sensitive to Fed policy shifts, slipped 1.2 basis points to 3.817%.

The US dollar weakened on Tuesday as easing geopolitical tensions weighed on safe-haven demand, while the euro climbed to its highest level since October 2021. The euro rose 0.38% to $1.162 after touching $1.1641 earlier, while the greenback dropped 0.88% to 144.80 yen and fell 0.90% to 0.8051 against the Swiss franc. This came despite Fed Chair Jerome Powell reiterating that inflation is expected to pick up over the summer.

Brent crude oil prices tumbled 6% on Tuesday, settling at a two-week low as traders priced in reduced risk of supply disruptions following the announcement of a ceasefire between Israel and Iran. Brent crude fell $4.34, or 6.1%, to $67.14 a barrel, while US West Texas Intermediate dropped $4.14, or 6.0%, to $64.37. The truce eased geopolitical risk premiums, though its stability remains uncertain after President Donald Trump accused both sides of violating the agreement just hours after it was declared.

Day’s Ledger
Economic Data

• US May New Home Sales data
• US Weekly Crude Oil Inventories data

Corporate Actions

• Bluspring Enterprises to consider financial results
• Can Fin Homes to consider fund-raising
• CEAT to consider fund-raising
• Exicom Tele-Systems to consider fund-raising
• Ind-Swift to consider financial results
• Signatureglobal (India) to consider fund-raising
• Valiant Organics to consider fund-raising

Policy Events

• US Fed Chair Powell testimony before Congress 
• German Buba Mauderer speaks

TICKERS

• Aurobindo Pharma’s subsidiary CuraTeQ Biologics gets UK regulator nod for Dyrupeg, marking its third biosimilar approval after Bevqolva and Zefylti; also cleared by EU in April.
• Himadri acquires 16.2% stake in US-based International Battery Co. for $4.43 million to support LFP material rollout, with access to Korea and Bengaluru plants.
• Hindalco to acquire AluChem in the US for $125 million, adding 60,000-tonne specialty alumina capacity and expanding its global high-tech materials portfolio.
• Infosys ;partners Zoetis for a strategic AI-led IT transformation, integrating automation and analytics to improve operational agility and digital responsiveness in animal health services.
• JB Chemicals gets USFDA approval for Amitriptyline Hydrochloride tablets in six strengths, expanding its portfolio of antidepressants targeted at relieving symptoms of depression.
• Kaynes Tech raises ₹15.99 billion via QIP at ₹5,569.50 per share, slightly below floor price, to fund expansion and business growth opportunities.
• PTC Industries’ subsidiary Aerolloy inks pact with Safran Aircraft Engines to manufacture military jet engine components, extending existing commercial aerospace partnership into defence segment.
• Vardhman Textiles picks up 31.2% in ReNew Green’s subsidiary for ₹166.7 million, strengthening its renewable energy access and sustainability initiatives.
• Vodafone Idea denies receiving official government communication on potential AGR dues relief, amid reports of extended repayment period and interest simplification plan.

MUST READ

• RBI opens the drain to re-anchor short-term rates
• Donald Trump eases pressure on Iran by saying China can buy its oil
• India, UK trade deal likely to be signed by July end
• Power minister urges states to plan nuclear projects to meet rising demand
• DGCA detects recurring defects in aviation checks at major airports
• We can wait and see course of economy before going for rate cut: Powell
• BoE bond sale decision ‘more interesting this year,’ Bailey says
• ECB’s Lane says disinflation process is ‘largely completed’
• Trump organization repays debt on troubled wall street tower
• Germany to raise defence spending to 3.5% cent of GDP in 2029