Iran ceasefire hopes bolster stocks, central banks in focus next

By Isla Binnie

NEW YORK (Reuters) -Stock indexes closed higher after last week's losses and a barrel of oil got $1 cheaper on Monday as investors took heart from reports that Iran was seeking to end hostilities with Israel, and stayed confident in their predictions for a busy week of central bank meetings.

Oil prices fell after the Wall Street Journal reported Iran was seeking a truce following an attack by Israel on Friday that raised fears of wider conflict, sent oil prices soaring, and weighed on stocks.

Sources told Reuters that Iran has asked regional allies to press U.S. President Donald Trump to influence Israel to agree to a ceasefire.

Geopolitics still loomed, with early cracks threatening to emerge among Group of Seven leaders, who are meeting in Canada. Officials gave conflicting statements about whether Trump would sign a draft statement calling for de-escalation of the Israel-Iran conflict.

"In terms of an escalation, where the U.S. is going to get involved or where it's really going to be all-out war, where nothing is sacred anymore, I don't think that's going to happen," said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

"It's probably a short-lived situation, so I think the market is rallying on that."

Following a torrid session on Friday, Brent crude futures settled at $73.23 per barrel, down $1 or 1.35%.

The Dow Jones Industrial Average ended 0.75% higher, the S&P 500 was up 0.94% and the Nasdaq Composite gained 1.52%.

MSCI's gauge of stocks across the globe marched 1.09% higher after the U.S. open and stayed stronger on the day to be quoted up 0.88% after the U.S close.

Earlier in the trading day, Europe's STOXX 600 was boosted by a rebound in travel stocks and Gulf stocks also recovered. [.EU]

Chinese blue chips gained after data showed rising retail sales and industrial output in line with expectations. [SS]

FED MEETING IN FOCUS, MORE DATA TO COME

A prolonged rise in oil prices could contribute to inflation, but movements of recent days are unlikely to strongly influence discussions when the Federal Reserve meets on Wednesday, said Emily Roland, co-chief investment strategist at Manulife John Hancock Investments.

"The Fed is data-dependent, and it takes time for the impact of oil prices (higher or lower) to feed into the inflation numbers," Roland said.

"In our view, the Fed likely keeps the markets waiting with no change to the view of between two to three rate cuts of 0.25% by the end of the year. The bond market is still pricing in two cuts over the year, we will see if this week changes things."

U.S. retail sales data is due on Tuesday and may show a pullback in autos, dragging the headline number down even as core sales edge higher. A market holiday on Thursday means weekly jobless claims figures will come out on Wednesday.

U.S. Treasury yields had initially fallen on the reports of Iran's outreach to Israel, but rose again ahead of the data release. The 10-year notes were last seen yielding 4.456%, from 4.424% late on Friday.

Central banks in Norway and Sweden also meet this week, with the latter expected to trim rates.

The Swiss National Bank meets on Thursday and is considered certain to cut by at least a quarter point to take rates to zero, with some chance it may go negative given the strength of the Swiss franc.

The Bank of Japan holds a policy meeting on Tuesday and is widely expected to hold rates at 0.5%, while leaving open the possibility of tightening later in the year.

There is also speculation it could consider slowing the rundown of its government bond holdings from next fiscal year.

The calmer mood across markets saw some of gold's safe-haven bid reverse and it was down 1.38% to $3,384.97 an ounce..

(Reporting by Isla Binnie in New York, additional reporting by Alun John in London, Davide Barbuscia in New York and Wayne Cole in Sydney; Editing by Alex Richardson, Toby Chopra, Sandra Maler and Rod Nickel)