Focus remain on Mid-East tensions and upcoming testimony by Fed Gov Warsh

EU mid-market update: Focus remain on Mid-East tensions and upcoming testimony by Fed Gov Warsh; 5 big US banks to kick off earning season.

Notes/observations

- European equities opened lower as expected, with travel/leisure and consumer-facing names hardest hit on Mideast escalation and inflation fears. Oil majors cushioned the FTSE 100, with BP up on strong Q2 trading gains. Conflict drove a synchronized bond sell-off: 10-year Gilts opened over 5bps higher (8-week high), with Bunds and Treasuries both at multi-month highs, and markets now fully price a 25bps BOE hike by September. Gold and silver firmed on safe-haven demand but remain near YTD lows, and the dollar was mixed. Analysts note that elevated oil could paradoxically become the trigger for eventual de-escalation, and flag possible unwinding of 10-30yr US Treasury flatteners.

- Hostilities against Iran have resumed in full. Trump notified Congress of a new 60-day military campaign without prior approval, declaring Iran had broken a recently agreed MOU, as CENTCOM ran a third consecutive night of strikes across Bushehr, Chah Bahar and Jask (hitting coastal defences, missile/drone sites and maritime capabilities), and employed sea drones in combat for the first time. Iran retaliated across multiple fronts, confirming a ballistic-missile strike on a US airbase in Jordan, targeting US facilities in Kuwait and a US vessel, and disabling supertankers in the Strait, while Bahrain intercepted several inbound attacks. Tied directly into this, the US reinstated its naval blockade of Iran, with enforcement of all Iranian ports beginning 14 July at 20:00 GMT. Blockade is selective: it excludes only Iranian ships and Iran-linked customers, keeping Hormuz open to everyone else, but the shock is a proposed 20% toll on all transiting cargo as "reimbursement" for US-provided security. The immediate read is lower physical-disruption risk for non-Iranian oil and LNG, but sharply higher legal, insurance, freight and escalation risk - and materially higher delivered energy costs if the levy is actually implemented (no collection mechanism has been specified, and Japan and China have declined to endorse it). Crude has spiked to fresh MTD highs above $80/bbl (~10% above Friday's close), tanker incidents keep multiplying near Oman, and Iran insists the Strait will not reopen "under US aggression."

- As speculation grows around a potential new Meta bond offering as early as this week to fund further data center buildouts, adding to pressure on secondary tech debt and highlighting credit market concerns not yet fully reflected in equities, credit default swap spreads are widening across hyperscalers and semiconductor giants including Oracle, Meta, Amazon, Microsoft, Alphabet, Nvidia, AMD, Intel, and Broadcom reaching multi-month highs.

- Away from Iran, China's Jun trade surplus smashed records at $125.6B (exports +27% y/y, fastest since 2021, AI-driven), with Q2 GDP and the full data dump due tomorrow, the key question is whether weak domestic demand persists. In Japan, dovish signals from Fin Min Katayama (weighing JGBs in NISA accounts, potential GPIF rebalancing) drove the strongest 20-year JGB auction in 16 years and pulled yields lower even against the global rout. The AI/semi complex remains a live risk on both sides: heavy semi/memory losses drove the Asian selloff, and Ericsson warned of intensifying H1 2026 component pricing pressure, while a heavy earnings slate looms, ASML (15th), TSMC (16th), and US banks reporting today (JPMorgan, Goldman, BofA, Citi, Wells Fargo). On the Fed, Waller struck a dovish, transparency-focused tone, flagging AI as a genuine swing factor for financial conditions.

- Yesterday, EU failed to endorse its 21st sanctions package against Russia. Talks resume today. Sticking point is a proposed ban on transiting Russian LNG through EU waters, which Greece opposes to protect its shipping industry.

- Victory Giant Technology (2476.HK) issued a voluntary clarification on July 14, 2026, rebutting market rumors by confirming strong demand for its high-end HDI and multilayer AI-related PCBs, a growing order backlog, normal production/shipments, and long-term customer commitments into 2027–2028. This statement directly counters speculation over potential NVIDIA Rubin server architecture delays—particularly Kyber NVL144 rack issues tied to complex PCB midplane manufacturing challenges—while affirming smooth cooperation with core clients as a major supplier.

- Asia closed higher with Shanghai Composite outperforming +1.4%. EU indices -0.5% to -1.0%. US futures -0.3% to +0.4%. Gold +0.5%, DXY -0.2%; Commodity: Brent +4.6%, WTI +3.8%; Crypto: BTC -0.6%, ETH +0.1%.

Asia

- China Jun Trade Balance: $125.6B v $120.4Be; Exports Y/Y: 27.0% v 19.0%e; Imports Y/Y: 36.0% v 26.1%e.

- Singapore Q2 Advance GDP Q/Q: 1.1% v 1.3%e; Y/Y: 5.7% v 5.6%e.

- Australia July Westpac Consumer Confidence Index: 83.9 v 80.6 prior.

- Australia Jun NAB Business Confidence: -5 v -14 prior.

- Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 75.3 v 74.7 prior.

- Japan Fin Min Katayama stated that was time to consider including JGBs in NISA (Nippon Individual Savings Accounts). Adjustments would be made to GPIF portfolio if required.

Global conflict/tensions

- Pres Trump notified Congress of a new 60-day campaign against Iran without their approval; hostilities against Iran resumed on July 7th.

- United States Central Command launched a third consecutive night of strikes on Iran.

- Iran commented on area it took revenge including Bahrain, Jordan, and Northern Iraq. Iran also attacked, 2 UAE tankers in southern part of the Strait.

Europe

- UK Jun BRC LFL Sales Y/Y: 1.7% v 3.4% prior (aided by heatwave and the World Cup boosted UK consumer spending in June).

- Heatwaves and drought have pushed Germany’s Rhine River to multi-year lows. Low level of Rhine disrupting freight traffic and driving up shipping costs along Europe’s busiest inland waterway.

Americas

- Fed’s Waller warned that a further rise in core inflation could prompt the FOMC to tighten monetary policy sooner rather than later.

- US Jun Federal Budget Balance:-$120.3B v -$128.3Be (**Note: Treasury refunded $49.2B in illegal tariffs in June, causing net customs outflow).

Energy

- Trump announced that US would impose a 20% toll on ships passing through the Strait of Hormuz as part of a renewed naval blockade of Iran. Fees would cover costs associated with securing the strategic waterway (**Reminder: Iran’s declared the Strait of Hormuz closed over the weekend).

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [FTSE -0.62% at 10,433.40, DAX -0.55% at 24,948.13, CAC-40 -0.95% at 8,285.43, IBEX-35 -1.00% at 19,134.71, FTSE MIB -0.73% at 52,422.50, SMI -0.86% at 14,143.20].

Market focal points/key themes: European indices open lower across the board and declined through the early part of the session; formal resumption of US-Iran ware weighs on risk appetite; among sectors managing gains are energy and materials; sectors leading the way lower include consumer discretionary and communication services; tech sector weighed down amid sell-off in memory stocks in Asia; oil & gas subsectors supported after Brent breaches $85/bbl; focus on US CPI and Fed’s Warsh testimony later in the day; unofficial start of Q2 earnings season with reports from JPMorgan, Bank of America, Wells Fargo and Citigroup in the upcoming US session.

Equities

- Consumer discretionary: Robert Walters [RWA.UK] -2.0% (trading update).

- Energy: BP [BP.UK] +2.5% (trading update).

- Healthcare: Evotec [EVT.DE] -28.5% (slashed outlook).

- Industrials: Hapag-Lloyd [HLAG.DE] +7.0% (raised outlook), Volkswagen [VOW3.DE] +0.5% (pre-close call with analysts).

- Telecom: Ericsson [ERICB.SE] -8.0% (earnings).

Speakers

- BOE Gov Bailey testified to UK Treasury that financial stability risks had increased due to global economy, Mid-East tensions and AI - Treasury testimony.

- German Econ Ministry noted that the domestic economy showed cautious stabilization at mid-year.

- Russia Central Bank (CBR) Dep Gov stated that could not turn blind eye to rising fuel prices. Would l be able to ensure that inflation returns to target in 2027 “with a carefully calibrated” monetary policy.

- Iran Oil Min Paknejad noted that despite US removal of oil waivers, Iran's oil exports continued as usual.

- Iran Army Spokesperson reiterated stance that Strait of Hormuz would not open with U.S aggression and war.

Currencies/fixed income

- USD was kept within recent ranges as the focus remained on the Middle East tensions.
EUR/USD steady around the 1.14 level; USD/JPY at 162.30 by mid-session.

- Dealers to watch keened Fed Chairman Warsh testimony before the House and the Senate respectively, beginning on Tuesday.

- Bunds bear flatten occurred for a second day in moves fueled by expectations for faster inflation as Brent crude rises above $85 for the first time in a month. Oil higher after President Trump’s rei-mposition of a blockade on Iranian ships.

- 10-year German Bund yield last at 3.12%, France 10-year Oat at 3.91% and 10-year Gilt yield at 5.01% 10-year Treasury yield: 4.62%; 10-year JGB: 2.70%.

Economic data

- (FI) Finland Jun CPI M/M: -0.2% v +0.5% prior; Y/Y: 2.1% v 2.1% prior.

- (DE) Germany Jun Wholesale Price Index M/M: -0.7% v -0.6% prior; Y/Y: 4.9% v 5.9% prior.

- (NO) Norway Jun PPI (including Oil) M/M: -7.1% v -1.8% prior; Y/Y: 14.9% v 24.0% prior.

- (CH) Swiss Jun Producer & Import Prices M/M: -0.3% v -0.4% prior; Y/Y: -2.1% v -1.8% prior.

- (IN) India Jun Wholesale Prices Y/Y: 9.9% v 9.2%e.

- (ES) Spain May Home Sales Y/Y: -7.3% v -1.8% prior.

- (CZ) Czech May Current Account Monthly (CZK): -38.3B v -19.4Be.

Fixed income issuance

- (UK) DMO opened its book to sell GBP-denominated 1.75% inflation-linked 2038 Gilts (UKTi); guidance seen bps to 2037 linker.

- (NL) Netherlands Debt Agency (DSTA) sold €3.27B vs. €2.5-3.5B indicated range in 2.50% Jan 2031 DSL Bonds; Avg Yield: 2.911% v 2.795% prior.

- (ES) Spain Debt Agency (Tesoro) sold total €2.11B vs. €2.0-3.0B indicated range in 3-month and 9-month bills.

Looking ahead

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

- 05:30 (ZA) South Africa May Total Mining Production M/M: No est v 3.3% prior; Y/Y: 1.5%e v 8.2% prior; Gold Production Y/Y: No est v -0.2% prior; Platinum Production Y/Y: No est v 36.5% prior.

- 05:30 (CH) Switzerland to sell 3-month Bills.

- 05:30 (DE) Germany to sell €6.0B in new 2.70% Sept 2028 Schatz.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-Month Bills.

- 05:30 (ZA) South Africa to sell combined ZAR2.55B in 2033, 2038 and 2042 bonds.

- 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO).

- 05:40 (UK) BOE allotment in 6-month GBP-enhanced liquidity repo operation (ILTR).

- 06:00 (US) Jun NFIB Small Business Optimism: 95.7e v 95.3 prior.

- 07:00 (RU) Russia announcement on upcoming OFZ bond issuance (held on Wed).

- 08:00 (PL) Poland May Current Account Balance: -€1.8Be v -€1.6B prior; Trade Balance: -€2.0Be v -€2.0B prior; Exports: €30.5Be v €30.6B prior; Imports: €32.3Be v €32.6B prior.

- 08:00 (BR) Brazil July CONAB Soybean Production: No est v 0.2B prior.

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

- 08:15 (US) ADP Preliminary Employment Change for 4-weeks ending Jun 27th: No est v +21.0K prior.

- 08:30 (US) Jun CPI M/M: -0.1%e v +0.5% prior; Y/Y: 3.8%e v 4.2% prior.

- 08:30 (US) Jun Core CPI M/M: 0.2%e v 0.2% prior; Y/Y: 2.8%e v 2.9% prior.

- 08:30 (US) Jun CPI Index NSA: 334.702e v 335.123 prior; Core CPI Index : 336.930e v 336.121 prior.

- 08:30 (US) Jun Real Avg Hourly Earning Y/Y: No est v -0.8% prior (revised from -0.7%); Avg Weekly Earnings Y/Y: No est v -0.5% prior (revised from -0.4%);

- 08:55 (US) Weekly Redbook LFL Sales data.

- 10:00 (US) Fed Chair Warsh testifies.

- 11:30 (US) Treasury to sell 6-Week Bills.

- 12:40 (US) Fed’s Barr.

- 13:00 (US) Fed's Goolsbee.

- 13:30 (US) Fed’s Cook.

- 14:55 (US) Fed’s Bowman.

- 15:00 (AR) Argentina Jun National CPI M/M: 2.0%e v 2.1% prior; Y/Y: 33.8%e v 33.2% prior.

- 16:00 (UK) BOE Gov Bailey at annual FPS dinner.

- 16:00 (US) May Total Net TIC Flows: No est v $26.1B prior; Net Long-term TIC Flows: No est v $103.1B prior.

- 16:30 (US) Weekly API Crude Oil Inventories:

- 17:00 (KR) South Korea Jun Export Price Index M/M: No est v 0.3% prior; Y/Y: No est v 46.9% prior; Import Price Index M/M: No est v -0.3% prior; Y/Y: No est v 24.8% prior.

- 18:45 (NZ) New Zealand Jun Total Card Spending M/M: No est v 2.2% prior; Retail Card Spending M/M: No est v 1.7% prior.

- 19:00 (KR) South Korea Jun Unemployment Rate: 2.8%e v 2.8% prior.

- 19:00 (IT) ECB’s Panetta (Italy).

- 19:50 (JP) Japan May Core Machine Orders M/M: -4.2%e v +8.7% prior; Y/Y: 12.3%e v 15.6% prior.

- 21:30 (CN) China Jun New Home Prices M/M: No est v -0.2% prior; Used Home Prices M/M: No est v -0.3% prior.

- 22:00 (CN) China Q2 GDP Q/Q: 0.9%e v 1.3% prior; Y/Y: 4.5%e v 5.0% prior; GDP YTD Y/Y: 4.8%e v 5.0% prior.

- 22:00 (CN) China Jun Retail Sales Y/Y: -0.1%e v -0.6% prior; Retail Sales YTD Y/Y: No est v 1.4% prior.

- 22:00 (CN) China Jun Industrial Production Y/Y: 4.6%e v 4.5% prior; Industrial Production YTD Y/Y: No est v 5.4% prior.

- 22:00 (CN) China Jun Fixed Urban Assets YTD Y/Y: -5.0%e v -4.1% prior.

- 22:00 (CN) China Jun Surveyed Jobless Rate: 5.1%e v 5.1% prior.

- 22:00 (CN) China Jun Property Investment YTD Y/Y: -16.8%e v -16.2% prior; Residential Property Sales YTD Y/Y: No est v -14.1% prior.

- 22:35 (CN) China to sell 30-Year Additional Bonds.

- 23:00 (KR) South Korea May M2 Money Supply M/M: No est v 0.6% prior; “L” Money Supply L M/M: No est v 1.8% prior.

- 23:00 (ID) Indonesia May External Debt: No est v $439.8B prior.