GLOBAL MARKETS-Shares rally, oil slumps as Iran-Israel ceasefire goes into effect

By Stella Qiu and Alun John

SYDNEY/LONDON, June 24 (Reuters) - Oil tumbled 3%, global shares surged and the dollar dropped on Tuesday as U.S. President Donald Trump announced a ceasefire between Israel and Iran, a dramatic turnaround after the U.S. bombed Iran's nuclear sites over the weekend.

Brent futures LCOc1 had already slid 7% on Monday and U.S. shares jumped after Iran made a token retaliation against a U.S. base and signalled it was done for now.

With the immediate threat to the vital Strait of Hormuz shipping lane seemingly over, the global benchmark touched its lowest since June 11 and was last at $69.11 a barrel, U.S. crude futures CLc1 dropped 3.2% to $66.32 a barrel.

"Investors mostly shrugged at what appeared on the surface a seismic geopolitical event over the weekend and those who kept their nerve and held off from de-risking have so far been proven right," said Kenneth Broux, head of corporate research FX and rates at Societe Generale.

Israeli Defence Minister Israel Katz saying he had ordered the military to strike Tehran in response to what he said were Iranian missiles fired in a violation of the ceasefire, did little to disrupt the mood. Iran said it had not violated the ceasefire.

Risk assets rallied, with S&P 500 futures ESc1 up 0.9% and Nasdaq futures NQc1 1.1% higher. Europe's Stoxx 600 gained 1.4%, with travel stocks including airlines surging 3.5% .SXTP, while oil and gas names shed 2%. .SXEP

Earlier in the day, MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS jumped 2.2%, while Japan's Nikkei .N225 rallied 1.1%.

But the positive news did not spill over into the bond market where the focus instead was on Germany's draft budget, which includes record investment, requiring higher borrowing.

The impact was particularly felt on longer dated bonds. Germany's 30-year yield rose 8 basis points to 3.065% and its 10-year yield rose 5 bps to 2.60%. DE30YT=RR, DE10YT=RR GVD/EUR

Those moves rippled across markets, with the U.S. 10-year yield up 2 bps at 4.34% and Britain's 10-year yield up 2 bps to 4.51% US10YT=RR, GB0YT=RR, though increasing bets on U.S. rate cuts this year kept U.S. bonds in check.

RATE CUTS APPROACHING?

Investors are also keeping a close eye on remarks from Federal Reserve policymakers, who in aggregate have been nervous about giving any signs that rate cuts are imminent.

However, Vice Chair for Supervision Michelle Bowman said on Monday the time to cut interest rates was getting nearer as risks to the job market may be on the rise.

That followed Fed Governor Christopher Waller saying on Friday he would consider a rate cut at the July 29-30 meeting.

Fed Chair Jerome Powell will appear before Congress later on Tuesday and, so far, has been more cautious about a near-term easing.

Markets still only imply around a 22% chance the Fed will cut at its next meeting on July 30, but a September cut is near-to-fully priced. 0#USDIRPR

News of the ceasefire saw the dollar extend an overnight retreat and slip 0.77% to 145.0 yen JPY=EBS, having come off a six-week high of 148 yen overnight.

The euro EUR=EBS rose 0.2% to $1.1602 on Tuesday, having gained 0.5% overnight.

The yen and euro benefited from the slide in oil prices as both the EU and Japan rely heavily on imports of oil and liquefied natural gas, while the U.S. is a net exporter.

The risk-on mood saw gold prices ease 1.3% to $3,323 an ounce XAU=.