Classic relief rally on Trump pausing US strikes on Iran

EU mid-market update: Classic relief rally on Trump pausing U.S strikes on Iran; Energy falls, equities climb; Saga remains fragile to fresh headlines, and historically subject to whiplash.

Notes/observations

- Dominant theme is Trump's late-Friday decision to pause airstrikes on Iran after 13 consecutive nights, reportedly on CENTCOM's advice that targets were "mostly exhausted." Diplomacy is tentatively reviving, with Oman pursuing a Hormuz transit deal and Iran confirming progress in talks. Energy collapsed with Brent, WTI and EU/UK gas -7%, dragging yields lower and lifting risk assets. Caution warranted though: the blockade continues, Tehran denies any US negotiations, unconfirmed Houthi strikes hit Saudi facilities, and few vessels have yet attempted Hormuz transit.

- For EU macro, German IFO Business Climate beat at 86.6 vs 86.0e on a strong Expectations component (86.7 vs 84.7e), though Current Assessment missed. The print lands in a hawkish ECB context, Kazimir says a September hike is likely needed even if the outlook improves, and a hike remains ~90% priced ahead of pivotal Eurozone inflation data this week.

- During Asia, markets showed fatigue toward "circular" AI financing: Nvidia is reportedly discussing a $250B backstop for OpenAI's 10GW Ohio data centre plus up to $350B in chip financing, while SK Hynix and Samsung unveiled a $950B memory supply partnership with Nvidia/Broadcom. Korean investors were unimpresse, Kospi -0.9%, SK Hynix and Samsung slipped. By contrast, CXMT's Shanghai debut soared ~+500%, implying a ~$485B market cap, making it mainland China's most valuable company.

- Nvidia said structuring a ~$250B credit backstop that would underwrite OpenAI’s lease and construction debt for SoftBank’s 10 GW Ohio campus—explicitly excluding the GPUs—while simultaneously negotiating a parallel facility of up to $350B to finance the very chips that will fill those halls, pushing the all-in capital stack above half a trillion dollars. The arrangement again crystallizes an extreme form of circular capital: SoftBank is both OpenAI’s largest outside shareholder and the project developer (with OpenAI already an investor in SoftBank Energy), Nvidia is both the exclusive silicon supplier and a prospective $100 billion equity partner, and now the primary guarantor of the infrastructure that will consume its own product. Because OpenAI still lacks an investment-grade rating, the structure effectively substitutes Nvidia’s balance sheet and SoftBank’s development capacity for traditional project finance, converting vendor financing into a systemic, multi-party guarantee loop.

- UK policy speculation: City economists warn sustained higher oil could force UK rates up, keeping pressure on the BoE ahead of Thursday's expected hold; this morning's oil retreat helped gilt yields to one-week lows. The UK also landed in the favourable 10% band of the new US forced-labour tariffs.

- Notable EU corp news: AstraZeneca beat on Q2 EPS and affirmed guidance, shares firmer with focus on H2 catalysts. Vodafone beat on Q1 revenue and raised FY27 guidance. Galp beat and lifted guidance but traded lower; Audi cut FY26 revenue and margin outlook. In M&A, DCC Energy agreed a KKR/ECP takeover up to 6,797p/shr, Serica trumped Ratio for Pharos, and Pinewood disclosed a £4.48/shr approach.

- On Friday, SpaceX successfully launched Starship Flight 13 from Starbase, Texas, marking the first deployment of operational Starlink V3 satellites from the upper stage. The Super Heavy booster completed its ascent and executed a controlled splashdown in the Gulf of Mexico, while the Ship performed a precise atmospheric reentry, gathered improved heat-shield data under elevated dynamic pressure, relit its engines, and achieved its softest intact ocean landing yet in the Indian Ocean. The flight delivered critical telemetry on vehicle performance and heat-shield durability after prior iterations. Elon Musk stated that, unless issues emerge from the data review, the next test will attempt the first tower catch of the Starship upper stage itself using the Mechazilla chopsticks.

- Asia closed higher with ASX200 outperforming +1.4%. EU indices +0.4-1.6%. US futures +0.9-1.6%. Gold +1.0%, DXY -0.2%; Commodity: Brent -6.6%, WTI -6.9%; Crypto: BTC+0.9%, ETH +4.0%.

Asia

- Japan Jun PPI Services Y/Y: 3.2% v 3.4%e.

- Monetary Authority of Singapore (MAS) July Monetary Policy Statement tightened policy for the 2nd straight meeting. Increased the slope of its FX band but no change to width and level at which is centered.

- China Jun Industrial Profits Y/Y: 15.1% v 21.1% prior.

- Indonesia Central Bank (BI): Governor Warjiyo to step down early, named Destry Damayanti as interim Gov.

Global conflict/tensions

- De-escalation.

- US paused strikes against Iran for a second night as Iran refrained from targeting US bases in the region amid Omani-mediated diplomatic talks. Oil beginning week on soft footing.

- US CENTCOM recommended pausing airstrikes around the Strait of Hormuz, citing diminishing campaign effectiveness.

- President Trump backed away from recent threats of escalation largely due to concerns over depleting the Pentagon’s already strained stockpiles of Patriot interceptors and air defense munitions in the region. Other reports stated that Trump decided to postpone the deadline for a major attack on Iran for another chance for Iran to return to the negotiating table. Oman officials traveled to Iran on Friday for talks and diplomatic efforts.

- Senior Iran official stated that it would halt attacks as long as the US maintained its latest pause.

- Iran For Ministry noted that technical & political talks between both sides were continuing.

Europe

- ECB’s Zigman (Croatia): Fallout from the Iran war takes time to impact inflation.

- Kazakhstan President has urged Putin to freeze the Ukraine war.

Americas

- Fed said to be facing a difficult policy decision as renewed inflation pressures raise the possibility of keeping rates higher or even delivering a hike.

Energy

- Iran Dep For Minstated that was committed to fair negotiations and guarantee safe and peaceful passage of ships through the Strait of Hormuz.

- Yeman Houthis said to carriy out operations against Aramco facilities in Saudi Arabia’s Jizan & Yanbu; Stressed that would not hesitate to escalate steps based on developments.

- Saudi led coalition in Yemen noted it would continue to take necessary measures to protect its ships and Saudi interests.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [FTSE +0.43% at 10,782.49, DAX +1.57% at 25,486.17, CAC-40 +0.71% at 8,431.94, IBEX-35 +1.36% at 19,851.30, FTSE MIB +0.73% at 52,182.00, SMI +0.49% at 14,398.00, S&P 500 Futures +0.94%].

Market focal points/key themes: European indices trade mostly higher after Eurozone government bond yields retreated from multi-year highs on Monday as a sharp drop in crude oil prices eased near-term inflation fears. The German 2-year yield fell to 2.77% and the 10-year Bund yield slipped to 3.13%, reflecting renewed buying interest amid hopes that cooler energy costs could limit further ECB tightening. European natural gas prices also plunged nearly 9%, tracking the oil sell-off after Iran signalled it would halt attacks on shipping routes if the US paused military strikes, reducing risks to LNG supplies and winter storage. Analysts noted that moderating inflation data alongside lower energy costs could further stabilise yields, easing debt-servicing pressures for Eurozone governments ahead of BOE, FOMC and BOJ decisions s and key economic releases this week.

Equities

- Consumer discretionary: DCC [DCC.UK] +1.5% (to be acquired).

- Energy: TotalEnergies [TTE.FR] -3.0% (appeals ruling; falling oil prices), Pharos Energy [PHAR.UK] +25.5% (to be acquired).

- Financials:

- Healthcare: Astrazeneca [AZN.UK] +1.5% (earnings; several Phase 3 trial results).

- Technology: ASML [ASML.NL] +2.0% (Nvidia mulling financing backstop for OpenAI).

- Telecom: Vodafone Group [VOD.UK] +4.0% (earnings).

Speakers

- ECB's Kazimir (acting Slovakia member) noted that a September rate hike was likely needed even if outlook improved; ECB must tighten more than expected if Mid-East crisis worsened and needed to act before second-round effects emerge.

- Japan PM Takaichi noted that Inflation remained the top priority' aim for diet session was to fulfill election pledges. Domestic economy beginning to pick up momentum. Country must exit excessively tight fiscal policy and break away from years of excessive austerity. To submit bill for lowering 8% sales tax on food.

- Iran Foreign Ministry Spokersperson Baghaei stated that currently no negotiations with the US and that Iran had not asked for resumption of talks. Stressed that the situation in Hormuz had not changed and that the Strait remained closed.

Currencies

- A pause on the hostilities between US and Iran provided some risk appetite to begin the trading week. Oil prices were lower by over 7% by mid-session. Weekend press reports suggested that the FOMC was facing a difficult policy decision as renewed inflation pressures raised the possibility of keeping rates higher or even delivering a hike.

- EUR/USD dipping below the 1.14 level as market scaled back its bets on near-term ECB rate hikes.

- GBP/USD at 1.330 area with focus on Thurs BOE rate decision. Dealers see the central bank keeping policy steady with a few dissenters seeking a 25bps rate hike.

- USD/JPY at 163.50 area as Japan PM stressed that its priority was on inflation.

- Lower oil proves helped to move bond yields lower. 10-year German Bund yield last at 3.13%, France 10-year Oat at 3.92% and 10-year Gilt yield at 4.99’ 10-year Treasury yield: 4.64%; 10-year JGB: 2.77%.

Economic data

- (FI) Finland July Consumer Confidence: -5.3 v -5.3 prior; Business Confidence: 7 v 4 prior.

- (SE) Sweden Jun Household Lending Y/Y: 3.2% v 3.1% prior.

- (TW) Taiwan Jun Monitoring (Leading) Indicator: 41 v 39 prior.

- (CH) Swiss Weekly Total Sight Deposits (CHF): 469.3B v 469.4B prior; Domestic Sight Deposits: 442.7B v 443.0B prior.

- (DE) Germany July IFO Business Climate: 86.6 v 86.0e; Current Assessment: 86.5 v 87.3e; Expectations Survey: 86.7 v 84.7e.

- (EU) Euro Zone Jun M3 Money Supply Y/Y:3.3 % v 3.3%e.

- (HK) Hong Kong Jun Trade Balance (HKD): -52.0B v -73.1Be; Exports Y/Y: 53.4% v 43.5%e; Imports Y/Y: 45.4% v 43.5%e.

Fixed income issuance

- None seen.

Looking ahead

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays).

- 06:00 (UK) July CBI Retailing Reported Sales: No est v -54.0 prior; CBI Total Dist. Reported Sales: No est v -33.0 prior.

- 06:00 (IL) Israel to sell combined ILS2.8B in 2030, 2031, 2034, 2037 and 2052 bonds (6 tranches).

- 06:00 (BE) Belgium Debt Agency (BDA) to sell €2.4-2.8B in 2031, 2033 and 2035 OLO bonds.

- 06:00 (RO) Romania to sell RON700M in 7.65% 2031 Bonds.

- 07:00 (BR) Brazil July FGV Consumer Confidence: No est v 88.7 prior.

- 07:00 (ZA) South Africa Central Bank (SARB) Gov Kganyago.

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey.

- 08:00 (MX) Mexico Jun Trade Balance: $2.8Be v $2.3B prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:30 (US) Jun Preliminary Durable Goods Orders: +1.8%e v -4.5% prior; Durables (ex-transportation): 0.8%e v 1.4% prior; Capital Goods Orders (non-defense/ex-aircraft): 0.8%e v 1.4% prior; Capital Goods Shipments (non-defense/ex-aircraft): 0.5%e v 0.1% prior.

- 09:00 (IN) India announces details of upcoming bond sale (held on Fridays).

- 09:00 (FR) France Debt Agency (AFT) to sell €6.2-7.8B in 3-month, 6-month and 12-month bills.

- 10:30 (US) July Dallas Fed Manufacturing Activity: 1.1e v 0.0 prior.

- 10:30 (CA) Bank of Canada (BOC) Market Participant Survey.

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.

- 13:00 (US) Treasury to sell 2-year and 5-year Notes.

- 16:00 (US) Weekly Crop Progress Report.

- 17:00 (KR) South Korea July Consumer Confidence: No est v 106.6 prior.

- 18:45 (NZ) New Zealand Jun Filled Jobs M/M: No est v 0.3% prior.

- 19:01 (UK) July BRC Shop Price Index Y/Y: 1.2%e v 1.2% prior.

- 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 75.6 prior.

- 22:30 (HK) Hong Kong to sell 3-month, 6-month and 12-month bills.

- 22:35 (CN) China to sell 3-month and 6-month bills.

- 23:05 (AU) RBA Gov Bullock.