Oil prices cool as Europe heatwave intensifies and tech sector continues to see volatility

EU mid-market update: Oil prices cool as Europe heatwave intensifies and tech sector continues to see volatility; Markets keep digesting the asymmetries in almost every industry.

Notes/observations

- Volatility remains the dominant story, driven more by technicals and stretched positioning than any fundamental shift. The global tech/AI selloff (SOX closed down 8%) spilled into Asia overnight - the Kospi swung wildly intraday - and into a mixed European open. The Stoxx 600 is flat as the tech rout loses some steam, but defense weakness drags the DAX (Rheinmetall), while the FTSE 100 holds flat as real estate and housebuilding strength offsets software and defense losses. Luxury lifts the CAC 40 (LVMH ), the semiconductor-heavy AEX edges up (ASML). Sterling firms against the euro and gilt yields fall as UK leadership concerns ease. Bunds are supported by the tech weakness.

- In a historic first, the US Senate voted to require congressional approval before further US military action in Iran, marking a significant bipartisan pushback against unilateral executive war powers. The largely symbolic resolution passed thanks to four GOP defections and two Republican absences, despite prior failed attempts. While it is unlikely to immediately constrain ongoing operations or policy, the vote introduces political friction and oversight pressure on the Trump administration. It coincides with the Pentagon’s request for ~$80B to replenish munitions and cover Iran-related costs, even as the ceasefire/deal has already compressed geopolitical oil risk premia and cast uncertainty over future defense supplemental spending.

- President Trump accused major oil companies of gouging consumers by failing to lower gasoline prices at the pump in line with the sharp decline in crude oil costs. In a Truth Social post, he stated that companies are not passing on savings “commensurate with the sharply lower prices they are paying for oil,” and directed the Department of Justice to immediately investigate the issue.

- GPU compute spot prices keep softening into late June, tracking the correlated decline in the UBS Hyperscaler Basket and LLM Token Expenditure Index as enterprises shift from agentic exuberance to budget rationing and efficiency scrutiny. H100 and H200 rentals eased amid generational handoff pressure, while Blackwell variants (B200 ~$4.22–$4.45/hr, B300 in the mid-$4–7 range) normalized faster than expected as supply ramps met optimizing demand. RTX 5090 remains the efficient experimentation layer gaining share. The market seems to be no longer just asking whether frontier models get smarter, but whether incremental compute produces net work reduction ex hallucination issues or merely expensive inventory with depreciation schedules—marking the shift where full data centers risk becoming cleanup liabilities rather than moats.

- Germany’s Defense Ministry has confirmed the cancellation of the long-delayed F126 frigate program and intends to purchase 8 MEKO A-200 frigates instead. The decision represents a major setback for Rheinmetall (its stock experiencing worst session in 25 years), which had been positioned to take over the troubled F126 program from Damen and secure a significant contract; the shift to TKMS’s MEKO platform comes despite recent expectations from Rheinmetall management for a Q2 resolution in their favor.

- Russia is reportedly grappling with severe contract soldier recruitment challenges, with inflows dropping by a third in Moscow and halving nationwide, alongside poor-quality recruits causing high desertions and units at 30–40% capacity. This has prompted discussions of a new mobilization wave as early as October 2026, after parliamentary elections. Same time, security services are urging Putin to postpone the September Duma elections following Ukrainian strikes on Moscow, amid economic strains including acute fuel shortages and rationing. Targeted attacks on refineries have turned fuel supply disruptions into a political risk, triggering regional limits, price spikes, halted sales in Crimea, and eroding public confidence in wartime stability. These intertwined military and domestic pressures are forcing the Kremlin to consider stringent options, from mobilization to emergency measures.

- Micron reports Q3 FY2026 earnings tonight facing a high bar. Sentiment is for memory chips very bullish, with Street expectations around $34–35B revenue and ~$20 EPS on ~80% gross margins, but investors are already pricing in a strong AI/HBM-driven cycle peak and want clear signals on sustainability. The bigger emerging question is competition: China’s CXMT is playing by different rules: state-backed patience allows it to ramp capacity aggressively, absorb losses longer, and use today’s rich commodity margins as funding to build domestic supply chains and HBM capabilities. Traders are also circulating Counterpoint Research note warning that “a sharp correction in memory prices from the second half of 2027 cannot be completely ruled out” if new fab capacity expansions become visible - the topic which could be discussed during MU earnings call.

- Cerebras reported its first quarterly results since its IPO, with Core Revenue of $191.3M (up sharply y/y) and Adj. EBITDA turning positive at +$12.7M. Hardware revenue grew 60% and Cloud/Services surged 167%, driven by accelerating demand for its wafer-scale AI inference technology. The company guided Q2 Core Revenue at ~$194M and FY26 Core Revenue at $855–865M (+69% y/y at midpoint), with cloud growth expected to accelerate in the second half as new data centers come online and the OpenAI multi-year deal (>$20B) ramps further. CEO Andrew Feldman highlighted Cerebras’ speed advantage (“fast tokens are the most valuable”), citing momentum with pioneering customers including OpenAI (already running GPT-5.x models) and the newly finalized AWS Bedrock partnership. Management emphasized that data center capacity—not demand or supply—is the primary near-term constraint, with meaningful AWS contribution expected in 2027.

- SK Hynix has confirmed plans to raise KRW 45.5T (~$29.4B) through an ADR listing on Nasdaq. The company intends to issue 17.79 million new shares to support the ADR offering, scheduled for July 10th, earlier than previously speculated delays to August. The capital raise will primarily fund EUV equipment purchases and the construction of new semiconductor fabrication plants in South Korea.

- Snam's CEO struck an optimistic tone on the European refill season, guiding Italian gas storage above 90% by end-October. Context matters here: Europe entered the 2026 injection season with low inventories, and analysts had flagged that high summer prices and LNG dependence made the 90% target challenging, with a 75-80% buffer seen as more realistic under stable supply. Snam had already indicated that capacity auctions secured volumes consistent with a 90% fill (sites were ~50% by end-April), so this reads as a reaffirmation of existing guidance rather than a fresh positive surprise.

- Asia closed mixed with KOSPI outperforming +3.3%. EU indices -1.0% to +0.2%. US futures -0.1% to +0.5%. Gold -0.9%, DXY +0.3%; Commodity: Brent -1.6%, WTI -1.8%; Crypto: BTC +0.6%, ETH +1.2%.

Asia

- Japan May PPI Services Y/Y: 3.3% v 3.3%e.

- BOJ Summary of Opinions ( MPM) noted that was more appropriate to adjust degree of monetary support as FX moves pushing up import prices; Financial conditions remain. Broad acknowledgment of economic resilience and inflation risks accommodative BoJ board member, appropriate to continue raising interest rate as financial conditions are accommodative; One member said Neutral rate is ~2%.

- Japan said to be looking to "improve" management of its $1.3T FX reserves.

- Australia May CPI M/M:-0v -0.4%e; Y/Y: 4.0% v 4.3%e.

- South Korea May Retail Sales Y/Y: 9.0% v 7.2% prior.

Global conflict/tensions

- US – Iran negotiations shifting into low-level technical working groups for the rest of the week.

- The week being characterized by conflicting narratives surrounding nuclear oversight and sanctions relief.

- US Sec of State Rubio began Gulf visit to advance the US-Iran peace deal with regional partners.

Americas

Treasury Sec Bessent noted that strong dollar concept was distinct from currency gains; US must avoid vulnerability to any foreign chokepoint. Told Iranians that US wanted a "big deal" and that the negotiations would be a process. Confident Fed Chair would optimize a path for growth, price stability.

- US Senate for the first time voted to halt Iran war unless Trump received approval from Congress.

Energy

- Weekly API Crude Oil Inventories: -0.8M v -8.3M prior.

- Oil prices around 4-month lows over growing optimism over the normalization of global supplies.

- Qatar PM Sheikh noted that Gulf state would resume normal LNG production within weeks.

- Pres. Trump posted that the big Oil Companies were not dropping their price at the pump commensurate with the sharply lower prices they are paying for oil.

- US Diesel prices moved below $5.00/gallon (lowest since March).

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 % at #, FTSE -0.05% at 10,423.24, DAX -0.93% at 24,704.64, CAC-40 +0.14% at 8,352.20, IBEX-35 -0.34% at 19,410.42, FTSE MIB -0.32% at 51,859.50, SMI +0.67% at 14,003.60, S&P 500 Futures %].

Market focal points/key themes: European indices open generally lower and had mixed performance through the early part of the session; outperforming sectors include real estate and consumer discretionary; among underperformers are utilities and industrials; tech sector supported after ASML partners with TNO on photonic chip manufacturing; Segro rejects offer from Prologis; Rheinmetall under pressure and TKMS supported after reports Germany will cancel F126 frigate program in favor of MECO A-200; earnings expected in the upcoming US session include Micron.

Equities

- Consumer discretionary: Deutsche Post [DPW.DE] +1.0% (FedEx results), Adidas [ADS.DE] +1.0% (Nike pre-annoncement), Deutsche Post [DPW.DE] +1.0% (FedEx results).

- Energy: Shell [SHEL.UK] -0.5% (oil prices lower).

- Financials: Segro [SGRO.UK] +15.5% (rejected Prologis offer).

- Industrials: Rheinmetall [RHM.DE] -13.5% (US Senate votes to limit Trump's war powers in Iran; Germany is reportedly moving to cancel the delayed F126 frigate program and instead buy eight smaller MEKO A-200 frigates from TKMS).

- Technology: ASML [ASML.NL] +1.5% (Cerebras earnings).

- Materials: Givaudan [GIVN.CH] +1.5% (analyst upgrade).

Speakers

- Sweden Central Bank (Riksbank) Jun Minutes noted that it stood prepared to adjust monetary policy in terms of tightening or easing. Impact of Iran war was visible in price pressure. Complicated situation in which to make decisions and it will probably remain so for some time to come.

- RBA’s Hauser noted that it had work to do to tame "too high" inflation.

- BOJ Dep Gov Himino reiterated overall assessment that domestic economy was recovering modestly. Reiterated forward guidance that to continue raising rates in response to economy and prices.

- Japan Social Security panel reportedly urged a cut to food sales tax to 1% for 2-years.

- Thailand Central Bank Policy Statement noted that the decision to keep policy steady was unanimous. Monetary policy should be accommodative. Economic expansion was expected to be stronger but households under pressure from decelerating income growth and rising living costs. Inflation to exceed target later in 2026 and rise on supply-side factors.

- IAEA Chief Grossi stated that inspectors to visit Iran nuclear sites.

Currencies/fixed Income

- USD maintained its firm tone against the major pairs aided by safe-haven flows and expectations of Fed rate hikes.

- EUR/USD at 1-year lows at 1.1343. An improving German IFO survey did little to move the market.

- GBP/USD steady in the session at 1.3187

- USD/JPY at 161.67. Dealers noted that a move above 161.96 would leave the yen at its weakest level since 1986.

- 10-year German Bund yield last at 2.90%, France 10-year Oat at 3.66% and 10-year Gilt yield at 4.73% 10-year Treasury yield: 4.48%; 10-year JGB: 2.65%.

Economic data

- (FI) Finland May PPI M/M: 1.3% v 1.2% prior; Y/Y: 7.4% v 4.6% prior.

- (FI) Finland May Unemployment Rate: 12.7% v 11.6% prior (highest since May 1999).

- (NO) Norway May Trend Unemployment Rate: 4.7% v 4.7% prior.

- (DK) Denmark May Retail Sales M/M: +1.0% v -1.8% prior; Y/y: 3.8% v 1.4% prior.

- (CZ) Czech Jun Consumer Confidence Index: 103.9e v 103.4 prior; Business Confidence: 99.2e v 99.0 prior; Composite Confidence (Consumer & Business): 99.9e v 99.7 prior.

- (TH) Thailand Central Bank (BoT) left the Benchmark Rate unchanged at 1.00% (as expected).

- (PL) Poland May Unemployment Rate: 5.9% v 5.9%e.

- (TW) Taiwan May Industrial Production Y/Y: 11.8% v 13.2%e.

- (DE) Germany Jun IFO Business Climate: 85.6 v 85.5e; Current Assessment: 87.0 v 86.3e; Expectations Survey: 84.1 v 84.8e.

- (CH) Swiss Jun UBS Expectations Survey: -25.0 v -11.1 prior

Fixed income issuance

- (IN) India sold total INR240B vs. INR240B indicated in 3-month, 6-month and 12-month bills.

- (NO) Norway sold total NOK2.0B vs. NOK2.0B indicated in 2036 and 2042 Bonds.

- (SE) Sweden sold SEK5.0B vs. SEK5.0B indicated in 0.75% May 2028 SGB bonds.

- (UK) DMO sold £4.25B in 4.125% Mar 2031 Gilts; Avg Yield: 2.284% v 4.651% prior; bid-to-cover: 3.47x v 3.36x prior; Tail: 0.1bps v 0.2bps prior.

- (IT) Italy Debt Agency (Tesoro) sold €2.5B vs. €2.5B indicated in 2.2% Feb 2028 BTP bonds.

- (IT) Italy Debt Agency (Tesoro) sold €1.75B vs. €1.25-1.75B indicated range in 2.40% May 2039 I/L Bonds (BTPei).

Looking ahead

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

- 05:30 (DE) Germany to sell combined €2.0B in 2037 and 2047 Bunds.

- 05:30 (PL) Poland to sell Bonds.

- 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays.

- 07:00 (US) MBA Mortgage Applications w/e Jun 19th: No est v -3.8% prior.

- 07:00 (BR) Brazil Jun FGV Consumer Confidence: No est v 88.8 prior.

- 07:00 (RU) Russia to sell OFZ Bonds.

- 07:15 (CA) BOC’s Rogers on panel.

- 07:20 (UK) BOE’s Breeden on panel.

- 07:30 (US) (US) Treasury Sec Bessent.

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

- 08:30 (CL) Chile Central Bank (BCCh) Jun Minutes.

- 08:30 (US) Q1 Current Account Balance: -$210.6Be v -$190.7B prior.

- 09:00 (BE) Belgium Jun Business Confidence: No est v -10.0 prior.

- 09:00 (CL) Chile May PPI M/M: No est v 1.6% prior.

- 10:00 (US) May New Home Sales: 640Ke v 622K prior.

- 10:30 (US) Weekly DOE Oil Inventories.

- 11:00 (UK) BOE’s Dhingra on panel.

-11:30 (US) Treasury to sell 17-Week Bills.

- 11:30 (US) Treasury to sell 2-Year FRN Reopening.

- 12:00 (RU) Russia May Industrial Production Y/Y: 2.5%e v 1.9% prior.

- 12:00 (RU) Russia Q2 Consumer Confidence: No est v -12 prior.

- 12:00 (CA) Canada to sell 10 Year Bonds.

- 13:00 (US) Treasury to sell 5-Year Notes.

- 13:30 (CA) Bank of Canada (BOC) Summary of Deliberations.

- 14:35 (IT) ECB’s Cipollone (Italy).

- 15:00 (AR) Argentina Q1 Current Account Balance: $0.5Be v $2.3B prior.

- 17:00 (KR) South Korea Jun Business Manufacturing Survey: No est v 100.8 prior; Non-Manufacturing Survey: No est v 97.5 prior.

- 18:00 (HU) Hungary Jun Business Confidence: No est v -8.8 prior; Consumer Confidence: No est v -0.9 prior; Economic Sentiment: No est v -6.7 prior.

- 21:30 (AU) Australia May Employment Change: +32.5Ke v -18.6K prior; Unemployment Rate: 4.4%e v 4.5% prior; Full Time Employment Change: No est v -10.7K prior; Part Time Employment Change: No est v -7.9K prior; Participation Rate: 66.7%e v 66.7% prior.

- 21:30 (AU) Australia May Job Vacancies Q/Q: No est v 2.7% prior.

- 21:30 (AU) Australia May Household Spending M/M: +0.5%e v -1.1% prior; Y/Y: 4.3%e v 4.9% prior.

- 22:00 (NZ) New Zealand to sell combined NZ$450M in 2032, 2034 and 2051 bonds.

- 22:30 (HK) Hong Kong to sell 7-year Bonds.

- 23:30 (TH) Thailand May Customs Trade Balance: -$5.5B v -$10.0B prior; Exports Y/Y: 12.7%e v 23.1% prior; Imports Y/Y: 36.3%e v 45.0% prior.

- 23:35 (JP) Japan to sell 20-Year JGB Bonds.