May 29 (Reuters) - Stop-start efforts by Tehran and Washington to extend their ceasefire and reopen the Strait of Hormuz dominate the market outlook, while U.S. and euro zone data should shed more light on the economic toll of the conflict.
Elsewhere, Indian policymakers grapple with the fallout, Colombians head to the polls, and the club of trillion-dollar tech firms looks set to grow.
Here's all you need to know about the coming week in financial markets by Dhara Ranasinghe and Alun John in London,
Lewis Krauskopf and Rodrigo Campos in New York, and Kevin Buckland in Tokyo.
1/ READY FOR A JOBS JOLT?
The latest U.S. monthly jobs report will test markets - and new Fed Chair Kevin Warsh - with investors alert to any signs of renewed inflation pressure.
Friday's May non-farm payrolls are expected to show jobs growth slowing to 96,000 and a jobless rate of 4.3%, according to a Reuters poll. That follows a stronger-than-expected 115,000 rise in April, pointing to a still-resilient labour market. Manufacturing and services data should offer further clues on economic momentum.
Any hint of overheating could rattle markets, with inflation concerns already driving bouts of higher bond yields. Inflation remains well above the Fed's 2% target ahead of Warsh's first meeting as U.S. central bank chief later in June. Markets now see a greater chance of a rate hike than a cut in 2026, despite President Donald Trump’s calls for easing.
2/ SENSITIVE TO SPILLOVERS
For European Central Bank policymakers, the key question is how far higher energy prices are feeding into broader inflation.
Tuesday's euro zone May CPI numbers should provide some answers, especially as the Middle East conflict has dragged on long enough for second-round effects to emerge.
Analysts expect annual headline inflation of 3%, but just 2.2% excluding energy and food.
The ECB looks set to raise rates by 25 basis points in June regardless, but the outlook beyond is less certain. Money markets are pricing in at least one, possibly two further hikes this year.
Much depends on inflation. ECB chief economist Philip Lane has warned the energy shock could prove persistent, though he noted it differs from the surge four years ago, driven by the Ukraine war and post-pandemic demand.
3/ WANT TO BE IN MY GANG?
The $1 trillion market-cap club has grown again, with South Korea's SK Hynix and U.S.-listed Micron Technology joining the ranks.
Led by Nvidia, now valued at more than $5 trillion, the group is dominated by companies at the centre of the AI boom. The additions underline the staying power of the AI-led rally, even as the Iran war drags on and deepens the global energy shock.
Investors now face a familiar dilemma: stick with a winning trade or worry more about concentration risk. Strong markets can be the most vulnerable if sentiment turns.
4/ RUPEE ON THE ROPES
The Indian rupee's slide to record lows has fuelled bets for a June 5 rate hike, despite signals the Reserve Bank of India is reluctant to use monetary policy to support the currency.
The rupee briefly neared 97 per dollar on May 22 before apparent central bank intervention steadied markets. Heavy reliance on imported oil has left India exposed to the Iran war, driving capital outflows and weighing on the currency.
While three sources told Reuters the RBI is not in a hurry to raise rates, some major banks are pencilling in a June move. Traders are split evenly between a hike and no change, with some perhaps encouraged by Sri Lanka's surprise one-percentage-point increase days ago.
5/ COLOMBIA VOTES
Colombia’s first-round vote on Sunday looks set to pave the way for a June 21 runoff. Leftist Senator Ivan Cepeda leads the polls but appears unlikely to secure an outright win, putting the focus on who advances with him: conservative Paloma Valencia or hard-right outsider Abelardo de la Espriella.
Markets will watch closely. Cepeda promises continuity on social spending, while his rivals tout tighter fiscal policy, market-friendly incentives and a tougher security line — a message that has resonated across a region drifting right. The peso and Ecopetrol shares will offer an immediate verdict.
With Brazil also heading towards a tight election in October between President Luiz Inacio Lula da Silva and right-wing challenger Flavio Bolsonaro, the broader theme is familiar: ideology matters less to markets than credible fiscal policy and inflation control.
(Graphics by Mayank Munjal. Compiled by Karin Strohecker. Editing by Mark Potter)
