Same rhetoric continues to be re-spun by US and Iran about state of war

EU mid-market update: Same rhetoric continues to be re-spun by U.S and Iran about state of war; Chips are down; No major catalyst over weekend.

Notes/observations

- Europe is flat to mixed, looking for a catalyst. After SK Hynix had its U.S IPO on Friday, it gave back nearly all its US IPO gains, -10-13% in Seoul after a blockbuster Nasdaq debut (~7x oversubscribed, ~$1.2T valuation, biggest-ever foreign US IPO). Dragged Kospi to Asia's worst (-8%, lowest since May). Not Hynix-specific: Samsung −6%, Kioxia −11%, signaling broader AI/memory caution. Amid a backdrop of China helium curbs, DRAM price hikes ahead and Korean chip exports still surging.

- We’re into third straight weekend of escalation after Trump ended the June ceasefire. US ran four rounds of strikes (300+ targets over three nights); Iran retaliated on US bases and Gulf allies (Kuwait, Oman, Qatar, Bahrain, Jordan, UAE). IRGC declared the strait "closed" bar its own route; Washington rejects this and keeps escorting tankers (~20–31 crossings/24h). Both sides now claim ceasefire violations; Iran refuses IAEA access. Mid-August is the deadline if the framework holds.

- South Korea’s AI-fueled rally faced fresh pressure Monday as SK Hynix plunged a record 15%, highlighting investor fears that the memory boom may be overstretched despite the company’s Nasdaq debut and strong HBM leadership for Nvidia. CEO Kwak Noh-jung underscored structural tightness, forecasting the industry’s worst memory supply crunch in 2027 with demand outstripping supply well beyond 2030. Speaking after the company’s strong Nasdaq debut, Kwak emphasized structural tightness in the AI supply chain — “Our customer demand continues to go up, while our capacity has limitations”.

- Further commentary on Japan pension allocations by Japanese officials but no immediate change to GPIF target allocations, but Tokyo may steer more into domestic assets within existing bands. Kihara: review only "if required" - tempering last week's read (from Katayama) of a forced overhaul to support the yen/JGBs. Mix stays 25/25/25/25; as the world's largest fund, even small shifts move JGBs, equities and the yen. JGB yields backed up Monday (10y +5bp, 20y +4bp) on war tensions - watch tomorrow's 20y auction. Yen weak (~162.11).

- For UK political scene, nominations close this week on Thurs (16th July) for Labour leader candidates. Burnham the clear frontrunner to replace Starmer (puts him as likely PM on ~20th July), soft-left but pledging fiscal discipline; Press saying Burnham is looking to unveil a possible expanded autumn Budget that would combine a fiscal statement with a departmental spending review.

- Q2 earnings season kicks off tomorrow with banks in focus, setting the tone for a high-stakes period where Tier1 analysts see elevated expectations holding firm: Tech and Energy continue lifting estimates, with guidance and revision trends near post-COVID highs and no clear signs of momentum rollover. Markets will scrutinize hyperscalers’ capex commentary most closely this season — whether massive AI infrastructure spend is already yielding measurable ROI or remains a faith-based bet on future returns amid China innovations — as proof of AI monetization again likely becomes the pivotal narrative. Key factors to watch across the board include early inflation relief for lower-income consumers signaling a potential spending recovery, the quality and sustainability of EPS beats, and whether bank results reflect resilient credit trends or emerging caution in a still-high-rate environment.

- Anthropic extended key promotions this weekend - free access to Claude Fable 5 (up to 50% of weekly limits at no extra cost for paid users) until July 12 and 50% higher Claude Code weekly limits through July 19 - delivering timely relief amid surging AI spending worries. Under GPT-5.6 pressure to deliver frontier performance without exploding costs, these promos echo PrismML’s ternary compression feat of fitting a dense 27B model into ~4GB, letting Fable punch above its weight in efficiency and intelligence density on existing plans. Both innovations counter AI Capex mania by prioritizing practical on-device and on-subscription optimization over brute scale, delivering more capable reasoning while taming the real China open-source AI pressure on energy, latency, and budgets.

- SpaceX’s Starship Flight 13 on Thursday, July 16 (18:45–20:15 ET launch window) represents another audacious leap in reusable orbital logistics, hurling an upgraded Super Heavy through hot-staging and precise recovery while the Starship upper stage tests critical in-space Raptor relight and heatshield resilience for rapid reusability. For the first time, it will deploy 20 advanced Starlink V3 satellites — complete with laser crosslinks and onboard “spotter” cameras monitoring the ship’s tiles in real time — dramatically scaling constellation capacity and user speeds while embedding diagnostic intelligence directly into the payload.

- Noteworthy EU corp news: AkzoNobel rejected Nippon Paint's €7.5B bid, proposing an Axalta merger of equals. EasyJet is waiting on Castlelake response following Apollo deal.

- Asia closed mixed as KOSPI underperformed -9.0%. EU indices +0-0.3%. US futures -1.0% to +0.1%. Gold -1.1%, DXY -0.1%; Commodity: Brent +2.5%, WTI +2.3%; Crypto: BTC -1.2%, ETH -0.7%.

Asia

- New Zealand Jun Performance Services Index: 50.6 v 48.0 prior.

- South Korea July 1-10 Exports Y/Y: 53.9% v 85.9% prior; Imports Y/Y: 17.4% v 35.6% prior.

Global conflict/tensions

- US Central Command insisted that the vital maritime transit corridor remained open and operational, while Iran adamantly claimed it has successfully shut the transit route down.

- Iran launched strikes against American regional allies, hitting sites in Kuwait and Bahrain while expanding its attacks to include Oman and Qatar, which hosts a major US military base.

Europe

- UK Burnham said to be considering an expanded autumn Budget that would combine a fiscal statement with a departmental spending review.

Americas

- US Senator Lindsey Graham (R-SC) died over the weekend.

- US Senator McConnell.5 (R-KY) stated that he would not be able to return to the Senate floor to vote quite yet.

Energy

- Oil prices began the session higher by 4.5% but retraced to be approx 2.5% higher by mid-session.

- US conducted multiple waves of strikes over the weekend against Iranian military targets to degrade Iran's ability to attack commercial shipping.

- Islamic Revolutionary Guard Corps forces fired directly at civilian vessels transiting the strategic waterway.

- Kpler intelligence data tracking maritime traffic, 12 vessel crossings were recorded on Friday, followed by 13 on Saturday, and 6 recorded on by Sunday. **Note: Overall, more than 34M barrels of Iranian crude oil have transited.
The Strait of Hormuz since the US lifted its blockade on Jun 18th,

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.03%, FTSE +0.17% at 10,515.50, DAX +0.10% at 25,111.00, CAC-40 +0.14% at 8,351.06, IBEX-35 +0.19% at 19,421.84, FTSE MIB +0.34% at 52,790.50, SMI +0.20% at 14,264.00, S&P 500 Futures -0.29%].

Market focal points/key themes: European indices opened generally lower and remained under pressure through the early part of the session; risk appetite muted as situation in the Strait of Hormuz worsened over the weekend; among sectors managing gains are energy and financials; sectors leading the way lower include technology and materials; oil & gas subsectors supported as Brent hovers just below $80; Akzo Nobel rejects Nippon Paint offer for its Decorative Paints unit; System1 rejects offer from Brave Bison; reportedly MasterCard considering sale of Vocalink to UK banks; earnings expected in the upcoming US session include Fastenal, and pre-close call from Volkswagen.

Equities

- Consumer discretionary: PageGroup [PAGE.UK] +10.0% (earnings).

- Financials: Plus500 [PLUS.UK] -13.5% (trading update).

- Healthcare: GSK [GSK.UK] +0.5% (trial data).

- Industrials: Volkswagen [VOW3.DE] +0.5% (CEO comments), Kongsberg Gruppen [KOG.NO] -9.5% (earnings).

- Technology: ASML [ASML.NL] -1.5% (SK Hynix sell-off in Asia; TSMC monthly sales).

- Materials: Akzo Nobel [AKZA.NL] -1.5% (notes Nippon Paint offer significantly undervalues Decorative Paints unit).

Speakers

- Iran Foreign Ministry Spokesperson Baghaei reiterated US had consistently violated the ceasefire agreement. Iran would not execute its commitments in MoU with U.S. as long as the other parties were not fulfilling its commitments. Trying to reach an agreement with Oman on joint mechanism on Strait of Hormuz but US pressure on Oman hindering efforts. Would not agree with IAEA request to access nuclear sites. Added that continued contacts with mediators.

- Iran Oil Min said to have held talks with Russian Energy Min.

- Japan govt said to have no immediate plans to change target asset allocations of its state pension funds but could work within existing allowable ranges to direct more investment to domestic assets.

- S&P affirmed Indonesia sovereign rating at 'BBB'; Outlook stable.

Currencies/fixed income

- Safe haven flows initially stemming from continues military exchanges between US and Iran characterized the Asian and early EU session helping the USD against the major pairs. However, Iran did note that it did continue to have contact with negotiators helping to cap oil prices.

- EUR/USD probed below the 1.14 level but drifted back above 1.1440 by mid-session. Dealers noted of Bunds bear flattening trades as higher oil prices driven by escalating Middle-East tensions lifted inflation expectations and bets on higher ECB interest rates. Markets currently pricing almost a full 25bps hike by Sept.

- USD/JPY saw the pair move above 162 after reports circulated that Japan had no immediate plans to change target asset allocations of its state pension funds. The yen was bid on Friday believing that such a move would cause some significant repatriation of the yen currency into Japanese assets (stocks and bonds).

- 10-year German Bund yield last at 3.08%, France 10-year Oat at 3.85% and 10-year Gilt yield at 4.91% 10-year Treasury yield: 4.57%; 10-year JGB: 2.76%.

Economic data

- (NL) Netherlands May Trade Balance: €6.7B v €7.7B prior; Exports Y/Y: 5.5% v 4.4% prior; Imports Y/Y: 5.4% v 1.2% prior.

- (FI) Finland May Current Account Balance: -€0.6B v -€2.2B prior.

- (NO) Norway May Industrial Production M/M: -1.0% v +0.6% prior; Y/Y: 0.5% v 1.2% prior.

- (NO) Norway May Manufacturing Production M/M: +0.7% v -0.6% prior; Y/Y: +2.2% v -0.6% prior.

- (RO) Romania Jun CPI M/M: 0.1% v 0.1%e; Y/Y: 10.4% v 10.5%e.

- (TR) Turkey May Retail Sales Y/Y: 13.7% v 11.7% prior.

- (TR) Turkey May Current Account Balance (TRY): -$1.5B v -$1.0Be.

- (CH) Swiss Weekly Total Sight Deposits (CHF): 471.3B v 479.2B prior; Domestic Sight Deposits: 444.8B v 440.9B prior.

Fixed income issuance

- None seen.

Looking ahead

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

- 05:25 (US) Fed;s Bowman.

- 05:30 (DE) Germany to sell combined €6.0B in 6-month and 12-month BuBills.

- 05:30 (EU) European Union to sell combined €7.0B in 2029, 2033 and 2041 NGEU bonds.

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

- 06:00 (IL) Israel Jun Trade Balance: No est v -$3.3B prior.

- 06:30 (IN) India Jun CPI Y/Y: 4.2%e v 3.9% prior.

- 07:00 (IL) Israel to sell bonds.

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

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

- 08:00 (IN) India announces details of upcoming bond sale (held on Fridays).

- 08:00 (ES) Spain Debt Agency (Tesoro) size announcement on upcoming issuance.

- 09:00 (FR) France Debt Agency (AFT) to sell €5.8-7.4B in 3-month, 6-month and 12-month bills (4 tranches).

- 09:00 (RU) Russia May Trade Balance: No est v $11.4B prior; Exports: No est v $38.8B prior; Imports: No est v $27.4B prior.

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

- 12:30 (US) Fed’s Waller.

- 12:45 (DE) ECB’s Schnabel (Germany).

- 14:00 (UK) BOE’s Pill (chief economist).

- 14:00 (US) Jun Federal Budget Balance: -$128.3Be v -$292.6B prior.

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

- 18:00 (NZ) New Zealand NZIER Business Opinion Survey.

- 18:00 (NZ) RBNZ’s Conway (chief economist).

- 18:45 (NZ) New Zealand May Net Migration: No est v 3.1K prior.

- 19:01 (UK) Jun BRC LFL Sales Y/Y: No est v 3.4% prior.

- 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 74.7 prior.

- 20:00 (SG) Singapore Q2 Advance GDP Q/Q: 1.3%e v 1.0% prior; Y/Y: 5.6%e v 6.0% prior.

- 20:01 (IE) Ireland Jun Construction PMI: No est v 50.2 prior.

- 20:30 (AU) Australia July Westpac Consumer Confidence Index: No est v 80.6 prior.

- 21:30 (AU) Australia Jun NAB Business Confidence: No est v -14 prior; Business Conditions: No est v 3 prior.

- 22:00 (CN) China Jun Trade Balance: $120.4Be v $105.43B prior; Exports Y/Y: 18.4%e v 19.4% prior; Imports Y/Y: 24.7%e v 27.4% prior.

- 22:00 (CN) China Jun Trade Balance (CNY-denominated): No est v 723.98B prior; Exports Y/Y: No est v 13.8% prior; Imports Y/Y: No est v 21.5% prior.

- 22:35 (CN) China to sell 10-year and 20-year Bonds.

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