A look at the day ahead in European and global markets from Tom

Westbrook

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.

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.

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.

Key developments that could influence markets on Tuesday:

Economics: European inflation, British GDP, U.S. job

openings and consumer confidence

Events: Sintra Forum

(Editing by Jacqueline Wong)