(The opinions expressed here are those of the author, a

columnist for Reuters)

By Mike Dolan

LONDON, June 25 (Reuters) - What matters in U.S. and

global markets today

By Mike Dolan, Editor-At-Large, Finance and Markets

As the geopolitical center of gravity shifts from the Middle

East to the NATO summit, Wall Street turns its attention back to

the domestic economy and rising speculation about a U.S.

interest rate cut as soon as September.

I'll discuss all the market news below. Make sure to check out

today's column, where I zero in on the U.S. economic metric that

has just surged to its highest point since 2006.

Today's Market Minute

* NATO leaders were set to sign up on Wednesday to a big

increase in defence spending at a short summit tailor-made for

U.S. President Donald Trump, who struck a reassuring tone on his

commitment to protecting fellow members of the alliance.

* The ceasefire brokered by President Trump between Iran and

Israel appeared to be holding on Wednesday, a day after both

countries signalled their air war had ended, at least for now.

* The contained move in oil prices during the Israel-Iran

war highlights the increasing efficiency of energy markets and

fundamental changes to global crude supply. ROI columnist Ron

Bousso explains why Middle East politics may no longer be such a

dominant force in oil markets.

* The Reserve Bank of India's jumbo rate cuts in early June took

economists by surprise, as many indicators point to an economy

chugging along nicely. Manishi Raychaudhuri, CEO of Emmer

Capital Partners, asks why the RBI needed to frontload monetary

stimulus?

* Financial markets have consistently overestimated the Federal

Reserve's readiness to cut interest rates in recent years. But

the latest Fed chatter, softening economic data and a dramatic

reversal in oil prices suggest markets could be right this time.

Read the latest from ROI columnist Jamie McGeever.

Fed rate bets surge as oil calms

Global stocks captured by MSCI's all-country index

, up more than 7% for the year-to-date, surged to

record highs early on Wednesday.

The ceasefire between Iran and Israel appears to be holding into

Wednesday, as debate swirls about just how much damage was done

to Tehran's nuclear program. President Donald Trump joins other

NATO leaders in The Hague for an annual gathering of the

alliance that will underscore a big boost to defense spending.

But perhaps the market's big takeaway from the last two weeks of

Middle East tensions is that the region is no longer the game

changer it once was in global energy markets.

Over the course of the near two-week conflict, global crude

oil prices never hit the sort of danger zone that would shift

the dial on inflation rates. And U.S. crude prices, back down at

$65 per barrel on Wednesday, are now more than 20% lower than

they were this time last year.

That matters for central banks and the Federal Reserve trying to

balance the outlook between rising import tariffs, a slowing

economy, an ebbing workforce and - now falling oil prices.

Even though Fed boss Jerome Powell remained non-committal on the

timing of the next Fed rate cut at the first of his two-day

congressional testimony on Tuesday, markets have latched on to

more dovish soundings from other Fed policymakers.

Fed futures now fully price a quarter-point rate cut by the

September policy meeting, with previously hawkish Fed board

governor Michelle Bowman indicating this week she may vote for a

cut as soon as July.

Futures pricing now sees some 60 basis points of cuts by

year-end and the so-called "terminal rate" in the Fed's easing

cycle has fallen close to 3.0% for February 2027 - almost 40bp

lower than it was just a month ago and more than 130bp below

current rates.

While the oil price relapse has helped, emerging splits among

Fed policymakers have intensified speculation about what happens

when Powell ends his term as Chair in May next year.

Incoming economic news is also fueling the rate chatter, with

consumer confidence readings for June unexpectedly plunging and

housing markets starting to wobble too.

The Federal Housing Finance Agency showed single-family

house prices fell 0.4% in April, the first decline since August

2022. That lowered the annual increase to 3.0% in April, the

smallest rise since May 2023.

And with pressure mounting on the Senate to pass Trump's fiscal

bill as soon as this week, U.S. Treasuries have lapped up both

the oil retreat and Fed talk - even as they negotiate more than

$200 billion of new debt sales this week.

Adding to the mix, Treasury Secretary Scott Bessent said the

date for the nation to reach its debt ceiling could change if

courts interfere with Trump's tariff policies.

Two and 10-year Treasury yields fell

to six-week lows on Wednesday regardless.

And the dollar is bearing the brunt of the easier rate horizon.

The euro hit new three-year highs on Tuesday and held

above $1.16 today as Germany outlines details of the big

spending, borrowing and defense push this week.

Wall Street stocks caught the tailwinds of easier

energy, rates and the dollar - rallying more than 1% on Tuesday

and futures held those gains overnight.

The gains in Asian and European stocks over the past two

days have been just as impressive, leading the global index to

new all-time highs. The twin impact of easier oil and the dollar

is a major relief for crude importers.

And with NATO aiming to lift defense spending targets to

some 5% of GDP, European defence stocks that already

up almost 50% this year added another 1% on Wednesday.

In company news, FedEx shares dropped nearly 6% in

pre-market trading after the logistics giant sounded caution for

the full year and forecast current-quarter earnings below

expectations as it battles pressures from U.S. tariffs.

Tesla's new car sales in Europe fell 27.9% in May

from a year earlier even as fully-electric vehicle sales in the

region jumped 27.2%.

And Worldline fell over 20% after an investigation by

21 European media outlets alleged the French digital payments

company covered up client fraud to protect revenue.

Chart of the day:

Today's events to watch

* U.S. May new home sales (10:00 AM EDT)

* Fed Chair Jerome Powell reprises semi-annual monetary

policy testimony before Senate Banking, Housing and Urban

Affairs Committee (10:00 AM EDT)

* Kansas City Fed President Jeff Schmid speaks; Bank of

England chief economist Huw Pill and BoE policymaker Clare

Lombardelli speak

* U.S. Treasury sells $70 billion 5-year notes, and $28

billion of 2-year floating rate notes

* U.S. corporate earnings: Micron Technology, General Mills,

Paychex

Opinions expressed are those of the author. They do not reflect

the views of Reuters News, which, under the Trust Principles, is

committed to integrity, independence, and freedom from bias.