Fed in the spotlight as Warsh faces Congress

• Asian markets declined sharply, with MSCI Asia-Pacific index down 1.2%, while Brent crude futures climbed to highest levels since mid-June on Iran tensions and potential 20% U.S. fee on Strait of Hormuz cargo ships
• Warsh faces questions on the Fed's balance sheet plans as hawkish Fed commentary has boosted odds of rate hikes later this month despite ongoing geopolitical uncertainty
• Major U.S. bank earnings (JPMorgan, Bank of America, Goldman Sachs, Wells Fargo, Citigroup) and June CPI data are due, which could further influence Fed policy expectations

Market Summary: Fed Chair Warsh Testimony Amid Geopolitical Tensions

Key Developments:

Fed Chairman Kevin Warsh is testifying before the U.S. House Financial Services Committee over two days, with markets closely watching for signals on monetary policy and the central bank's balance sheet plans. Recent hawkish comments from Fed Governor Christopher Waller have increased market expectations for additional rate hikes, potentially as early as this month.

Market Performance:

Asian markets declined sharply on Tuesday, with MSCI's Asia-Pacific index down 1.2%. European futures fell 0.9%, German DAX futures dropped 0.9%, and FTSE futures declined 0.4%. S&P 500 e-mini futures eased 0.2%. South Korea's Kospi experienced its worst two-day decline since the Iran war began, though it remains among the world's best-performing indexes this year.

Commodity Markets:

Brent Crude reached approximately $85 per barrel, its highest level since mid-June, driven by escalating Middle East tensions following a third consecutive night of U.S. military strikes against Iran and potential 20% U.S. fees on cargo ships transiting the Strait of Hormuz.

Regional Highlights:

Chinese stocks outperformed regional peers after June exports rose, supported by strong demand for semiconductors and data center equipment fueling the AI boom. Japan's Finance Minister Satsuki Katayama suggested possible adjustments to the country's massive pension fund investment strategy if market conditions shift significantly.

Key Data Releases:

U.S. June CPI and core inflation data due Tuesday, along with major bank earnings from JPMorgan Chase, Bank of America, Goldman Sachs, Wells Fargo, and Citigroup.