Markets Diverge as U.S.-Iran Talks Lift U.S. and European Stocks While Brazil Falls

Progress in diplomacy has eased some risk fears but unresolved differences and shifting U.S. rate expectations leave outcomes uncertain for energy, inflation and policy decisions.

Overview

On Friday, May 22, U.S. and major European indexes climbed with the Dow closing at a record 50,579.70 as investors reacted to signs of progress in talks between the United States and Iran.
U.S. officials described the negotiations as showing progress while Iran said core differences remain deep and Iran's foreign minister met Pakistan’s interior minister to discuss proposals, leaving the ultimate outcome uncertain.
Comments from Federal Reserve official Christopher Waller that higher energy and commodity prices could force higher interest rates shifted market rate odds higher and coincided with Kevin Warsh’s swearing-in as Fed chair.
Brazil’s Ibovespa fell 0.81% on May 22 as investors priced in stronger U.S. rate prospects, local election sensitivity and weaker bank shares, even as Azzas 2154 rallied about 3.9% on reports of a possible corporate split.
The unresolved talks matter for oil flow through the Strait of Hormuz and for inflation outlooks, so markets will be watching follow-up diplomatic moves, oil prices and Fed guidance for clues to policy and regional risk.