Oil drops on Iran deal as treasuries rally; Europe futures fall

[WELLINGTON] Oil fell as Iran and world powers were said to have reached a nuclear deal. Treasuries rallied with German bunds on prospects for lower inflation, while European equity- index futures retreated.

Brent crude slid 2 per cent by 7.50 am in London, while US oil declined 2.4 per cent. Futures on the Euro Stoxx 50 Index slipped 0.3 per cent. The yield on 10-year Treasuries decreased four basis points, while the rate on similar-maturity bunds fell three basis points. The Shanghai Composite Index dropped after a three-day rebound. Soybeans advanced as weather threatened crops from the US to India.

Iran and world powers sealed a historic accord to curb the Islamic Republic's nuclear program in return for the lifting of sanctions, according to an official involved in the Vienna talks. While Greek Prime Minister Alexis Tsipras tries to ram reforms demanded by creditors through parliament, investors are refocusing on the US economy. Retail-sales data on Tuesday and Federal Reserve chair Janet Yellen's testimony from Wednesday may provide clues on the timing of any interest-rate increases.

"One important side-effect of diminished Greece concerns Monday has been the recovery in Fed rate-hike expectations," BNP Paribas SA strategists including Daniel Katzive wrote in a note dated July 14.

"A firm run of US data this week could see expectations pulled a bit further forward to the benefit of the USD."

West Texas Intermediate oil slid to US$50.98 a barrel. Brent dropped to US$56.70 a barrel. The accord will curb the Iran's nuclear program in return for an easing of sanctions that have crippled the Islamic Republic's economy.

Over time, the lifting of sanctions would enable the oil- rich nation to ramp up its energy exports, access international finance and open the doors to global investors. It promises to end a 12-year standoff over Iran's nuclear activities that has at times drawn threats of military action from the US as well as from Israel, which has indicated it will lobby American lawmakers to reject the deal.

Soybeans rose for a fifth day, climbing as much as 1.6 per cent to US$10.45 a bushel on the Chicago Board of Trade, the highest for a most-active contract since Jan 12. Excess rains in parts of the Midwest are raising concern about the health of the US crop at the same time as a dry spell in India threatens fresh plantings.

Nickel for three-month delivery resumed losses in London, declining 2.2 per cent to US$11,495 a metric ton after gaining 4.4 per cent on Monday.

BLOOMBERG