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Cotton futures remained relatively stable at 65.4 cents per pound as traders evaluated the latest supply and demand outlook. The US Department of Agriculture (USDA) in its June report revealed a downward revision for US cotton production in 2025–26, now estimated at 14 million bales, down from 14.5 million bales in May and 14.4 million bales in 2024–25. This marks the second-lowest production level in the past decade. Along with this decline, ending stocks for 2025–26 are forecast to fall to 4.3 million bales, a significant drop from the May projection of 5.2 million bales. On the global front, cotton production for 2025–26 has been revised down to 116.99 million bales, from 117.81 million bales in May, largely due to declines in key producers like India, the US and Pakistan, despite a 1-million-bale increase in China. Global cotton consumption has also been revised down, with the 2025–26 forecast reduced by more than 300,000 bales to 117.76 million bales, signaling weaker demand.

Cotton Futures Hover Around 65.4 Cents

US stocks extended gains on Monday, with the S&P 500, Dow, and tech-heavy Nasdaq 100 each rising more than 1%, buoyed by easing geopolitical tensions. The Wall Street Journal reported that Iran is seeking to de-escalate hostilities with Israel and resume negotiations over its nuclear program, signaling its intentions through Arab intermediaries to both Israel and the US. Meanwhile, the Federal Reserve is expected to hold interest rates steady this week, with markets closely watching the updated Summary of Economic Projections for insights into how fiscal uncertainty and potential tariffs may influence the policy outlook. Tech stocks led the rally, with Meta, Palantir and Tesla rising more than 3% on increased investor interest tied to its military-related business. US Steel climbed as much as 5% after President Trump formally approved Nippon Steel’s $14.1 billion acquisition of the company. Meanwhile, Roku soared 10% following news of a new partnership with Amazon Ads.

US Stocks Rally as Iran Signals De-Escalation

The yield on the 10-year US Treasury note eased to 4.41% on Monday, down from an intraday high of 4.46%, as concerns diminished over the potential for Israel's conflict with Iran to escalate into a broader regional war. Sentiment was further supported by reports that Iran is signaling a willingness to resume nuclear negotiations, which contributed to a decline in oil prices. The drop in energy costs helped alleviate inflationary pressures, reducing strain on the bond market. Meanwhile, the Federal Reserve is expected to maintain the fed funds rate unchanged on Wednesday. Policymakers had already stated that uncertainty in the US economic outlook due to the unclear future for trade and fiscal policy will prevent them from clear policy pivots. Rate futures show that markets expect two rate cuts for the year, and the Summary of Economic Projections released with the Fed's rate decision will offer clues on how policymakers' view contrast with those of Wall Street.

Treasury Yields Fall From Session Highs

The dollar index extended losses to 97.8 on Monday, back again to 2022-lows, as traders dialed back some risk-off positioning while closely watching developments in the Israel-Iran conflict. Sentiment further improved following reports that Iran is signaling a willingness to resume negotiations over its nuclear program. The Wall Street Journal reported that Tehran has informed Arab officials that it is open to resuming negotiations, provided the United States refrains from participating in the attacks, citing officials. The news come as Israel and Iran continued to exchange attacks for a fourth consecutive day. Meanwhile, attention is turning to a busy week of monetary policy decisions, with a particular focus on the Fed. The Fed is widely expected to hold the federal funds rate steady, but markets will be closely analyzing the central bank’s updated economic projections, especially for insights into how policymakers view the broader economic impact of President Trump's policies.

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