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Trump says Iran and Israel agree to ceasefire

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Brent crude futures down nearly 10% in two days

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European, Asian shares and Wall St futures rise

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German draft budget sends Bund yields higher

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Dollar extends pullback, gold softens

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(Updates ahead of U.S. open)

By Stella Qiu and Alun John

SYDNEY/LONDON, June 24 (Reuters) - Oil tumbled nearly

4%, global shares surged and the dollar dropped on Tuesday as

markets took heart from a ceasefire between Israel and Iran and

shrugged off what U.S. President Donald Trump said were

violations by both sides.

Brent futures had already slid 7% on Monday and U.S.

shares jumped after Iran made only a token retaliation against a

U.S. base to an attack over the weekend, and signalled it was

done for now.

With the immediate threat to the vital Strait of Hormuz

shipping lane seemingly over, the Brent benchmark touched its

lowest since June 11 and was last at $68.81 a barrel, down 3.7%.

U.S. crude futures dropped 3.7% to $65.91 a barrel.

"Investors mostly shrugged at what appeared on the surface a

seismic geopolitical event over the weekend and those who kept

their nerve and held off from de-risking have so far been proven

right," said Kenneth Broux, head of corporate research FX and

rates at Societe Generale.

While the ceasefire so far has seemed shaky - Trump said he

was "not happy" with either side for violating the truce,

particularly with Israel - risk assets held onto their earlier

gains.

S&P 500 futures rose 0.8% and Nasdaq futures

were 1% higher. Europe's Stoxx 600 gained 1.3%, with travel

stocks including airlines surging 3.8%, while oil and

gas names shed 2%.

Earlier in the day, MSCI's broadest index of Asia-Pacific

shares outside Japan jumped 2.2%, while Japan's

Nikkei rallied 1.1%.

A further sign of the sudden improvement in sentiment is

that emerging market countries - from Mexico to Kazakhstan via

Turkey - have rushed to issue debt in the past two days, as have

many companies.

But the positive news did not spill over into the bond

market where the focus instead was on Germany's draft budget,

which includes record investment, requiring higher borrowing.

The impact was particularly felt on longer dated bonds.

Germany's 30-year yield rose 8 basis points to 3.06% and its

10-year yield rose 5 bps to 2.60%.

Those moves rippled across markets, with the U.S. 10-year

yield up 3 bps at 4.35% and Britain's 10-year yield up 2 bps to

4.51% , though increasing bets on U.S.

rate cuts this year kept U.S. bonds in check.

RATE CUTS APPROACHING?

Investors are also keeping a close eye on remarks from

Federal Reserve policymakers, who in aggregate have been nervous

in recent months about giving any signs that rate cuts are

imminent.

However, Vice Chair for Supervision Michelle Bowman said on

Monday the time to cut interest rates was getting nearer as

risks to the job market may be on the rise.

That followed Fed Governor Christopher Waller saying on

Friday he would consider a rate cut at the July 29-30 meeting,

though Atlanta Fed President Raphael Bostic told Reuters in a

story published on Tuesday that the Fed need not cut interest

rates with companies planning to raise prices later this year.

Fed Chair Jerome Powell will appear before Congress later on

Tuesday and, so far, has been more cautious about a near-term

easing.

Markets still only imply around a 20% chance the Fed will

cut at its next meeting on July 30, but a September cut is near

to fully priced.

News of the ceasefire saw the dollar extend an overnight

retreat and slip 0.8% to 144.9 yen, having come off a

six-week high of 148 yen on Monday.

The euro rose 0.2% to $1.1602 on Tuesday, having

gained 0.5% overnight.

The yen and euro benefited from the slide in oil prices as

both the EU and Japan rely heavily on imports of oil and

liquefied natural gas, while the U.S. is a net exporter.

The risk-on mood saw gold prices ease 1.4% to $3,319 an

ounce.