Iran de-escalation drives risk-on

EU mid-market update: Iran de-escalation drives risk-on; Historic coordinated yen intervention; Mixed final EU PMIs, soft German retail, quiet Swiss CPI.

Notes/observations

- Central theme from the weekend is the abrupt de-escalation in the US-Iran standoff. Over the weekend President Trump cancelled planned strikes on Iran, reportedly at the request of Iran and other regional states, conditioning the pause on rapidly concluding a deal, with a new round of talks starting Monday. Trump claimed a deal on the Strait of Hormuz is effectively agreed, with denuclearization to follow, and Tehran confirmed ongoing talks with Oman over Hormuz transit arrangements. The move reversed the escalation narrative from late last week, when reports (CBS, WSJ) suggested the US and Israel were preparing multi-day strikes on Iranian energy infrastructure. Brent tumbled roughly 5% to around $83/bbl (WTI near $74), dragging European energy majors lower at the open, while the broader European tape opened firmer on the reduced tail risk. Note also OPEC+ agreed overnight to lift output targets by a further 188K bpd from September, completing the rollback of the 2023 voluntary cuts. Falling oil fed straight into rates: 10-year gilt yields fell ~6bp to 4.98% and 10-year Bunds ~5bp to 3.16%, with easing inflation/hike fears the transmission channel. Caveat from the sell side: the Middle East situation is not yet definitively resolved, and toll/approval requirements for Hormuz transit remain unclear.

- Despite repeated claims that the Strait of Hormuz is effectively closed, energy markets analyst Javier Blas notes that substantial volumes of crude continue to move through it, with ship-to-ship transfers in the Gulf of Oman climbing and an estimated ~5 million barrels per day still flowing “dark”—one key reason the physical oil market has weakened rather than spiked further. Reminder: President Trump stated on Truth Social that the United States was “locked and loaded” for a military response against Iran at levels of intensity “not seen since World War II,” yet agreed to cancel the planned attack after Iran and other Middle Eastern countries requested a hold, asserting that the parameters of a deal had been reached; that framework, he said, would include the immediate, complete, and total opening of the Strait of Hormuz plus an end to Iran’s nuclear threat, with Israel joining the commitment and urging rapid finalization - Trump promised “direct” talks with Iran to take place during Monday’s afternoon. Iranian officials, however, describe only bilateral talks with Oman on a mutually acceptable transit route—respecting both sides’ sovereign rights and national security—as being in their “final stages,” while explicitly rejecting any current negotiations with the United States, denying plans for U.S. or Iranian delegations in the near term, and stressing that an understanding with Oman does not itself determine whether the Strait will reopen or remain restricted.

- Japan and the US (with rare South Korean participation) confirmed Friday's coordinated yen-buying intervention, the US Treasury intervening outright to support the yen. Japanese officials (FX diplomat Mimura) and Treasury Secretary Bessent both pledged further joint action if needed, and press reports suggest Japan may have sold ~$65B of USD/JPY. USD/JPY has fallen from near 164 (40-year yen lows) to the mid-156s, hitting 155.21 overnight. Strategists view the multilateral nature of the action, alongside FIMA repo usage, as a potential "game changer" that could durably cap yen weakness. This dovetails with a hawkish BOJ shift: September hike odds jumped to ~40% and October to ~89%, with 2-year JGB yields at the highest since 1995 and 5-year at record highs. The dollar sits near seven-week lows, though its resilience partly reflects lingering uncertainty over whether the Fed hikes in September, non-voter Musalem told the FT he preferred a 25bp hike at this week's FOMC, and NYT reports Fed Chair Warsh has proposed changing the frequency of FOMC meetings.

- Final July manufacturing PMIs painted a mixed but broadly stable picture: Euro zone at 51.9 (slightly below flash), Germany confirming a sixth month of expansion at 52.2, Spain edging back into expansion, but France slipping back into contraction (49.8) and Italy missing at 51.3. Germany's retail sales fell 1.1% m/m (worse than expected) despite a strong 4.6% y/y print, underscoring volatile, energy-price-sensitive consumer spending. Swiss CPI was in line and subdued (0.4% y/y), unlikely to shift the SNB outlook, while Turkish inflation held near 32% y/y. In the UK, Treasury sources signaled the government remains committed to its fiscal rules, with ministers told to fund new pledges within existing limits.

- M&A dominates the corporate tape: FT reports AstraZeneca has held talks with Bristol Myers Squibb on a pharma megadeal valued near $400, neither company commenting. Elsewhere, Prysmian is acquiring Atkore ($95/share cash, ~$3.8B EV), Monte dei Paschi is reportedly eyeing Banco BPM, TotalEnergies bought Shell's renewables business (selling a 50% developed-asset stake to KKR), and Ageas is selling its Maybank JV stake for €1.1B.

- Alibaba’s Qwen team officially launched Qwen3.8-Max, a 2.4-trillion-parameter sparse MoE model that posts frontier-competitive scores on agentic coding and multimodal benchmarks (86.6 Terminal-Bench 2.1, 67.7 SWE-bench Pro, 92.6 GPQA Diamond) at roughly $2/$6 per million tokens, with open weights scheduled for next week—the first time a Qwen-Max-class model will be fully open-sourced—and positions it as a cost-efficient alternative to Claude Opus 5, GPT-5.6 Sol, and Kimi K3 while outperforming smaller open rivals such as GLM-5.2 on long-horizon tasks. Note that Elon Musk confirmed Grok 4.6 is due this week. OpenAI meanwhile disclosed that an unreleased internal Astra model produced new solutions to ten mathematics and theoretical-computer-science problems that had stood open for a decade or more. The formal certificates remove model-hallucination risk from the proofs themselves, yet the results still await peer review, arrive amid ongoing community pushback against AI-driven mathematics that bypasses traditional attribution and verification norms, and leave Astra itself unreleased with no announced pricing or launch timeline.

- Asia closed lower with KOSPI underperforming -5.1%. EU indices +0.3-1.5%. US futures +0.4-0.6%. Gold +0.4%, DXY -0.1%; Commodity: Brent -4.3%, WTI -5.2%; Crypto: BTC -1.1%, ETH -1.6%.

Asia

-China July PMI Manufacturing: 50.9 v 52.0e (9th month of expansion).

-Japan July Final PMI Manufacturing: 54.5 v 54.7 prelim (confirms 6th month of expansion).

-Japan Finance Ministry: Confirms conducted coordinated Yen-buying intervention with US on Friday.

-US Treasury intervened in Yen exchange rates on Friday to support the Japanese currency through outright purchases - FT.

-South Korea July PMI Manufacturing: 53.1 v 52.1 prior (8th month of expansion).

Europe

- Astrazeneca held talks with Bristol Myers Squibb on pharmaceuticals megadeal valued at nearly $400B; both companies have not commented on the report - FT.

- Fitch Affirms Czech Republic sovereign rating at AA-; Outlook Stable.

-NHS England to revise Palantir platform data following concerns - FT.

- Germany July Retail Sales M/M: -1.1% v -0.3%e; Y/Y: 4.6% v 2.7%e.

- Euro Zone July Final Manufacturing PMI: 51.9 v 52.0e.

- Germany July Final Manufacturing PMI: 52.2 v 52.2e (confirms 6th month of expansion).

- France July Final Manufacturing PMI: 49.8 v 50.0e (back into contraction).

-Italy July Manufacturing PMI: 51.3 v 52.4e.

-Spain July Manufacturing PMI: 50.2 v 50.5e (returns back into expansion).

Americas

-Anthropic said to host several meetings in anticipation of IPO debut - WSJ.

-OpenAI may wait until 2027 to debut IPO; Blackstone has made a deal with Anthropic over OpenAI; Investors have expressed concerns over OpenAI's high cash burn - WSJ.

-Fed Chair Warsh recently proposed changing the frequency of FOMC's policy meetings (currently 8 regularly scheduled meetings per year) - NYT.

Conflict/tensions

-Iran Foreign Ministry Spokesperson Baghaei: Reiterates currently no talks with U.S; Talks are ongoing with Oman over Strait of Hormuz (in line).

-President Trump: New round of Iran talks to start Monday - Remarks on Air Force One.

-President Trump: There's a deal on Hormuz and there will be a deal on denuclearization.

-Trump agrees to cancel new attack on Iran "subject to being able to rapidly make a DEAL"; Asked by Iran and other Middle Eastern countries to hold off attack - Truth Social.

-Iran Foreign Minister Araqchi tells Saudi counterpart that any aggression by the US and Israel will be met with a decisive response.

-Reportedly US and Israel are preparing to bomb energy infrastructure targets in Iran as soon as this weekend; Power plants and refineries are likely targets; Trump has yet to give final approval for strikes - CBS.

-Reportedly Trump has ordered new attacks against Iran that would last a few days; Seeks to force Iran to "surrender" - WSJ.

Trade/energy

-White House announces tariff rate quota on imports of quartz surface products (QSP), effective Aug 15th.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [FTSE -0.01% at 10,866.78, DAX +1.47% at 26,008.61, CAC-40 +1.24% at 8,614.86, IBEX-35 +0.60% at 19,901.23, FTSE MIB +0.84% at 52,613.00, SMI +0.37% at 14,399.60, S&P 500 Futures +0.44%].

Market focal points/key themes: European equities advanced so far on Monday, with the STOXX 600 climbing 0.4% toward record territory as a more than 4% plunge in crude oil prices, triggered by U.S. President Trump’s announcement of direct talks with Iran and the cancellation of a planned military strike to reopen the Strait of Hormuz, outweighed lingering macroeconomic worries. Germany’s DAX led the gains with a 0.9% rise, followed by France’s CAC 40 up 0.8% and Italy’s FTSE MIB up 0.7%, while London’s FTSE 100 lagged with a slight 0.1% decline amid pressure from heavyweight AstraZeneca, whose shares slumped around 7% on reports of preliminary merger talks with Bristol Myers Squibb that could create a nearly $400 billion pharmaceutical giant. The oil-price relief provided a clear tailwind for energy-sensitive industrial, travel and consumer sectors that had been squeezed by elevated input costs, helping continental benchmarks build on July’s resilient close driven by solid second-quarter earnings. Investors also absorbed stabilising Eurozone PMI readings and German retail sales data against a backdrop of sticky July inflation at 2.9% and resilient GDP growth, which continue to keep the possibility of further ECB tightening on the table even as risk appetite holds firm near all-time highs.

Equities

- Consumer discretionary: Crest Nicholson [CRST.UK] +5.5% (drop in UK yields), PostNL [POST.NL] +8.5% (earnings).

- Energy: TotalEnergies [TTE.FR] -1.0% (acquisition; oil prices drop).

- Industrials: Stabilus [STM.DE] +3.5% (earnings).

- Healthcare: Astrazeneca [AZN.UK] -6.5% (said to have held talks with Bristol Myers Squibb on pharmaceuticals megadeal valued at nearly $400B).

Speakers

-Japan Top FX Diplomat Mimura: Will not hesitate to conduct further joint intervention (inline).

-Japan Fin Min Katayama: No comment on whether there was Forex intervention today.

-Treasury Sec Bessent: Friday's coordinated foreign exchange actions countered disorderly yen movements; We will not hesitate to participate in further joint intervention.

-Fed's Musalem (non-voter): I "expressed a preference" toward a 25 bps hike at this week's FOMC meeting - FT interview.

-Hungary PM Magyar: Hungary's Pax nuclear plant will be powered down completely on Sunday.

-New Zealand Fin Min Willis: Fuel price support price for working families remains for now, but under active review.

-Japan Top FX Diplomat Mimura: Will not hesitate to conduct further joint intervention (inline).

-Indonesia Fin Min: Maintains 2026 GDP growth forecast at 5.6-6.0%.

Economic data

-(UK) July Final Manufacturing PMI: 51.9 v 52.8e (lowest print since March).

-(GR) Greece July Manufacturing PMI: 54.3 v 53.8 prior.

-(EU) Euro Zone July Final Manufacturing PMI: 51.9 v 52.0e.

-(DE) Germany July Final Manufacturing PMI: 52.2 v 52.2e (confirms 6th month of expansion).

-(FR) France July Final Manufacturing PMI: 49.8 v 50.0e (back into contraction).

-(IT) Italy July Manufacturing PMI: 51.3 v 52.4e.

-(TR) Turkey July Preliminary Trade Balance: -$7.3B v -$10.4B prior.

-(TH) Thailand July Business Sentiment Index: 46.7 v 46.1 prior.

-(CH) Swiss July PMI Manufacturing: 53.2 v 54.8e; Services PMI: 63.9 v 59.8 prior.

-(CZ) Czech July Republic Manufacturing PMI: 52.2 v 53.4e.

-(ES) Spain July Manufacturing PMI: 50.2 v 50.5e (returns back into expansion).

-(TR) Turkey July CPI M/M: 1.8% v 1.9%e; Y/Y: 31.8% v 31.9%e.

-(PL) Poland July Manufacturing PMI: 49.0 v 47.6e.

-(HU) Hungary July Manufacturing PMI: 51.4 v 51.7e.

-(TR) Turkey July Manufacturing PMI: 47.7 v 47.1 prior.

-(SE) Sweden July PMI Manufacturing: 55.8 v 58.0 prior.

-(CH) Swiss July CPI M/M: -0.1% V -0.1%e; y/y: 0.4% v 0.4%e; CPI EU harmonized M/M: 0.3% v 0.1% prior; y/y: 0.7% v 0.7% prior; CPI core y/y: 0.3% v 0.3%e.

-(RU) Russia July Manufacturing PMI: 50.7 v 50.3 prior.

-(DE) Germany July Retail Sales m/m: -1.1% v -0.3%e; Y/Y: 4.6% v 2.7%e.

-(IN) India July Final PMI Manufacturing: 53.5 v 53.9 prelim.

-(SE) Sweden Aug SEB Housing-Price Indicator: 44 v 47 prior.

-(ID) Indonesia Jun Trade Balance: -$0.5B v -$0.7Be.

-(NL) Netherlands Jun Retail Sales Y/Y: 2.9% v 2.9% prior.

-(ID) Indonesia July CPI M/M: -0.1% v +0.1%e; Y/Y: 2.9% v 3.2%e; CPI Core Y/Y: 2.8% v 2.8%e.

Fixed income issuance

- (PH) Philippines sells total PHP50.0B vs PHB50.0B indicated in 3-month, 6-month and 12-month bills.

- (TW) Taiwan sells NT$120B in 1-year NCDs: Avg Yield: 1.626% v 1.604% prior; bid-to-cover: 1.58x v 1.68x prior.

Looking ahead

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

- 08:00 (CZ) Czech July Budget Balance (CZK): No est v -183.6B prior.

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

- 08:30 (CL) Chile Jun Economic Activity M/M: +0.3%e v -0.2% prior; Y/Y: +1.8%e v -0.9% prior.

- 09:00 (BR) Brazil July Manufacturing PMI: No est v 50.8 prior.

- 09:00 (SG) Singapore July Purchasing Managers Index: No est v 51.3 prior; Electronics Sector Index: No est v 52.2 prior.

- 09:45 (US) July Final S&P Global Manufacturing PMI: 53.8e v 53.8 prelim.

- 10:00 (US) July ISM Manufacturing: 53.9e v 53.3 prior.

- 10:00 (US) Jun Construction Spending M/M: 0.2%e v 0.1% prior.

- 11:00 (MX) Mexico July Manufacturing PMI: No est v 51.3 prior.

- 11:00 (MX) Mexico Jun Total Remittances: $5.4Be v $5.6B prior.

- 11:00 (MX) Mexico Central Bank Economist Survey.

- 11:00 (CO) Colombia July Manufacturing PMI: No est v 53.7 prior.

- 12:00 (IT) Italy July New Car Registrations Y/Y: No est v 10.6% prior.

- 14:00 (MX) Mexico July IMEF Manufacturing Index: 48.2e v 47.3 prior; Non-Manufacturing Index: 49.2e v 49.0 prior.

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

- 19:00 (KR) South Korea July CPI M/M: No est v 0.1% prior; Y/Y: No est v 3.2% prior; CPI (ex-food/energy) Y/Y: No est v 2.5% prior.

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

- 19:50 (JP) Japan July Monetary Base End of period: No est v ¥560.0T prior; Y/Y: No est v -13.7% prior.

- 20:01 (IE) Ireland July Manufacturing PMI: No est v 54.9 prior.

- 21:30 (AU) Australia July ANZ-Indeed Job Advertisements M/M: No est v -0.2% prior.

- 21:30 (AU) Australia Jun Household Spending M/M: No est v 1.3% prior; Y/Y: No est v 5.5% prior.