European markets closed modestly higher on Monday, with the DAX 40 up 0.29% and broader European indices participating in a global risk rally driven by AI-fueled US equity strength and falling oil prices. The key macro story is the sharp decline in crude oil — Brent is up 1.58% today in a technical bounce but remains under pressure after falling sharply last week on reports of progress toward a US-Iran ceasefire and potential reopening of the Strait of Hormuz. WTI crude similarly bounced 1.84% to $90.59 but remains near critical support at $90. The easing of geopolitical risk premia in energy markets is being welcomed by equity investors as an inflation relief, with lower oil prices reducing input costs and supporting bond markets.

The industrial metals complex is on fire, with copper surging 2.73% to $6.5573 and silver rallying 2.72% to $76.20, both outperforming gold which slipped 0.47%. The strength in copper and silver reflects optimism around global manufacturing recovery — final May manufacturing PMIs across Europe were mixed but showed sequential improvement, with Germany at 49.9 (still contracting but better than feared), Spain at 53.7, and the UK at 53.7. The manufacturing stabilization narrative is being reinforced by expectations for today's US ISM Manufacturing PMI, with consensus at 53.3 versus 52.7 prior. Traders are positioning for a broadening recovery beyond AI-driven tech, with industrial metals and cyclical equities benefiting.

US equity futures are flat to slightly positive ahead of the open, with the S&P 500 at 7,580.1 (+0.01%), Nasdaq 100 unchanged at 30,333, and the Dow Jones Industrial Average up 0.51% at 51,032. The indices are consolidating near record highs set last week, with traders showing caution ahead of today's key ISM data and Fed Chair Powell's remarks at 00:30 ET tonight. The AI-driven tech rally remains the dominant narrative, with mega-cap tech earnings from last week continuing to underpin sentiment. However, the breadth of the market is improving, with industrial metals, materials, and cyclical sectors showing relative strength as oil prices ease and manufacturing data stabilizes.

Crypto markets are mixed, with Bitcoin down 1.51% to $72,602 and Ethereum underperforming with a 1.77% decline to $1,980.55. Despite the broader risk-on environment in equities, crypto is consolidating as traders await fresh catalysts. The lack of immediate bullish drivers and profit-taking after recent gains have tempered momentum, though the macro backdrop of easing rate fears and strong tech sentiment remains supportive over the medium term.

In forex, the dollar is consolidating ahead of US data, with EUR/USD at 1.1653, GBP/USD at 1.3449, and USD/JPY at 159.34. The euro and pound are supported by stabilizing European and UK manufacturing data, while the yen remains under pressure from ultra-wide yield differentials despite falling US Treasury yields. The Australian dollar at 0.7178 is the standout performer, benefiting from surging commodity prices and optimism around global manufacturing recovery.

The key risk event for the US session is the ISM Manufacturing PMI at 14:00 ET, with consensus at 53.3 versus 52.7 prior. A strong print above 53.5 would validate the global manufacturing recovery narrative, support industrial metals and cyclical equities, and likely strengthen the dollar against the euro and pound. Conversely, a miss below 52.0 would raise concerns about US economic momentum and could trigger profit-taking in equities trading near record highs. The ISM Manufacturing Prices component (forecast 85.3 vs. 84.6 prior) will also be closely watched for signals on input-cost inflation — a high reading would complicate the Fed's easing path, while a decline would support the disinflationary narrative that has been driving risk assets higher.

Fed Chair Powell speaks at 00:30 ET tonight, and any commentary on the rate outlook will be critical. Markets are currently pricing in some probability of a June 2026 Fed cut after recent softer CPI data, and Powell's tone will determine whether that expectation is validated or pushed back. Hawkish remarks that downplay near-term easing could pressure equities and support the dollar, while dovish signals would likely extend the risk rally and weaken the greenback. Also watch for any commentary on the Fed's balance sheet policy and liquidity conditions.

Oil markets remain a key risk variable. Despite today's modest bounce, crude is under pressure from easing Middle East tensions, and any further progress on US-Iran ceasefire talks could send WTI below $90 and Brent below $92. This would be positive for equity markets and disinflationary for the Fed, but negative for energy-sector equities and oil-linked currencies like the Canadian dollar and Norwegian krone. Conversely, any reversal in ceasefire talks or surprise OPEC+ production cuts could spark a sharp oil rally and reverse the recent risk-on sentiment.