Strait of Hormuz situation seen by US as 'static' with ability to hold naval blockade 'indefinitely'

EU mid-market update: Strait of Hormuz situation seen by US as 'static' with ability to hold naval blockade 'indefinitely'; China and Japan data disappoint.

Notes/observations

- Asia's growth engine is stalling just as Japan's bond market breaks higher. China's delayed July data dump was weak across every line that matters: retail sales grew at barely a third of the pace expected and slowed further from June, industrial production clearly undershot, and fixed asset investment contracted more deeply than forecast, extending what was already the sharpest run of investment decline since 2020. Property remains the sore point, with both new and second-hand home prices still falling and the jobless rate ticking up rather than down. The statistics bureau leaned on external uncertainty and extreme weather while insisting the annual growth target is still reachable, but the composition argues for more stimulus rather than less. Japan's Q2 GDP was arguably worse in kind: growth clearly missed, private consumption stalled outright where modest gains were expected, and business spending shrank where a solid rise was pencilled in, all while the deflator ran hotter than forecast. That is a stagflationary mix, and it has not softened the hawks: the ten-year JGB yield pushed to a three-decade high and Japan's former top currency official argued publicly for a hike at every meeting. Thailand was the rare bright spot, contracting marginally less than feared.

- Iran standoff has hardened into an energy-and-sanctions problem, with an AI-financing story running alongside it. Traffic through the Strait of Hormuz thinned over the weekend to a trickle of commodity vessels, against the backdrop of a threatened indefinite US naval blockade and a promised sanctions package aimed at Iran's shadow fleet, banking channels and crypto rails. Tehran is not engaging: its foreign minister denies talks are underway and its foreign ministry now disputes that the 60-day MOU clock even expires today, while press reports point to an Iranian plan to escalate. Israel struck Hezbollah targets in Lebanon, and Washington has pulled its last carrier out of Asia to concentrate on the Gulf. The dislocation is reshaping strategy elsewhere: Beijing's drive for a self-sufficient oil and gas system by 2030 looks vindicated, Seoul is discussing a Middle East contribution even as US joint drills are trimmed, and Tokyo is courting Canberra and Delhi on supply chains. Separately, Nvidia is reported to have cut its Stargate guarantee to under $120B from $250B, offloading balance-sheet risk onto private capital while preserving chip demand, supportive for semis, but a reminder of how leveraged the AI trade has become.

- For Europe, UK asking prices fell by the most for an August since 2017, and German firms cut US investment to a three-year low. Fitch's affirmation of the UK was a modest offset. The calendar builds from tomorrow, German ZEW and UK labour, then UK inflation and FOMC minutes on Wednesday, and global flash PMIs on Friday, though positioning is already skewed toward next week's US PCE print, Nvidia earnings and Warsh's first Jackson Hole address. Tail risks worth monitoring: a magnitude 7.7 quake off Indonesia with dozens dead, the DRC's Ebola outbreak now the country's deadliest ever at 2,325 deaths, a reported $15B loss at Jane Street, and live take-private talks at PayPal.

- WSJ reported that Nvidia has scaled back its proposed financial guarantee for OpenAI’s SoftBank-linked 10 GW Ohio data-center campus from roughly $250B to less than $120B, now limited to the initial phase, while separate talks on financing up to $350 billion in chip purchases continue; even the reduced backstop remains large relative to Nvidia’s previously disclosed $3.5 billion maximum exposure. Meanwhile, Oracle’s 2.5 GW Project Jupiter campus in New Mexico faces a delay of its critical gas pipeline until February 2027 after permitting setbacks, even as the company guides $90–95B in FY27 capex. These two episodes sit inside the same broader pattern in which hyperscalers and suppliers are locking in multi-year commitments—much of them still off-balance-sheet—on the assumption that power, construction, and eventual AI revenue will arrive on schedule. The $3T in uncommenced leases and purchase obligations across the sector simply amplifies the same risk: economic exposure accumulates faster than accounting recognition, leaving fixed costs that only become fully visible once utilization or timing proves less forgiving than planned.

- Same time, Alibaba released Qwen3.8-27B: a dense, natively multimodal open-source 27-billion-parameter model. It already matches or beats earlier Plus-tier systems on coding and office agent tasks, yet runs quantized on ordinary high-end consumer GPUs with a native 262K context that extends to 1M. The gap between frontier-class models and roughly equivalent performance on consumer hardware has been shrinking steadily—from the old 17–24-month range through successive cycles of about 12, 11, and then effectively 9 months as of now. If that compression continues, the next frontier models (Fable/Mythos class) should yield “Fable at Home”—roughly 30B-parameter versions with comparable capability—as soon as January 2027. Even as hyperscalers lock in multi-hundred-billion-dollar off-balance-sheet commitments for the next wave of data centers, usable near-frontier intelligence is already arriving on laptops faster than the industry’s infrastructure timeline implies.

- Asia closed mixed with Hang Seng outperforming +1.4%. EU indices -0.3% to +0.4%. US futures -0.2% to +0.5%. Gold +0.5%, DXY -0.3%; Commodity: Brent +0.9%, WTI +0.5%; Crypto: BTC +0.6%, ETH +0.8%.

Asia

- Japan Q2 Preliminary GDP Q/Q: 0.3% v 0.5%e; GDP Annualized Q/Q: 1.1% v 2.0%e.

- New Zealand July Performance Services Index: 50.6 v 50.6 prior.

- New Zealand July Food Prices M/M: 0.1% v 0.6% prior.

- New Zealand July Retail Card Spending M/M: No est v -1.4% prior; Total M/M: No est v -1.2% prior.

- Singapore July Non-oil Domestic Exports Y/Y: 24.2% v 26.1%e.

- President Trump ordered a substantial reduction in joint US-South Korean military exercises citing his very good relationship with Kim Jong Un, of North Korea. Noted South Korea President Lee declined to join the US in the 'denuclearization' of Iran.

- US removed its last aircraft carrier in Asia amid focus on Iran [USS Abraham Lincoln].

Global conflict/tensions

- Formal U.S.-Iran ceasefire expired on Sunday, Aug 16th.

- Ship attacks in the Strait of Hormuz continued over the weekend.

- Iran For Min Araqchi reiterated stance that gov had not decided to resume talks with US; messages being exchanged via ⁠Qatar and Pakistan did not amount ⁠to negotiations; Washington must meet conditions on the Strait for shipping to resume; Iran/Oman talks are separate and focused on sea route thru Strait of Hormuz.

Europe

- UK Aug Rightmove House Prices M/M: -2.0% v -1.0% prior; Y/Y: -1.0% v -0.4% prior.

- Fitch affirmed UK sovereign rating at 'AA-'; Outlook stable.

Energy

- Ukraine's Naftogaz: Part of production lost following Russian attacks. Russia has attacked facilities over a dozen times the past week.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [FTSE +0.12% at 10,762.83, DAX +0.02% at 26,439.00, CAC-40 -0.12% at 8,626.53, IBEX-35 -0.14% at 20,127.50, FTSE MIB +0.36% at 53,777.00, SMI -0.34% at 14,341.40, S&P 500 Futures +0.14%].

Market focal points/key themes: European equities opened the week modestly higher, with the Stoxx 600 up 0.2% as falling sovereign yields and a softer dollar pushed money markets to price a roughly 70% chance the Fed holds rates in September. Soft U.S. data—weaker July jobs, on-target inflation, and a 0.6% retail-sales drop—eased hawkish pressure and gave growth sectors room, though overall advances stayed restrained by Hormuz risks and elevated real yields after the summer rally. Fresh strength concentrated in argenx, which jumped 8% on a positive Phase III myositis readout, while semiconductor names such as ASML and STMicro advanced 2.5–3.5% on broader AI-linked demand; Maersk’s 5% gain reflected continued post-results repricing from last week’s raised EBITDA guidance. Against that backdrop, SIG Group plunged 16% after an abrupt CEO change only months into the role, showing how idiosyncratic shocks can still dominate on an otherwise light European calendar ahead of U.S. flash PMIs and Jackson Hole.

Equities

- Consumer discretionary: Evolution [EVO.SE] +4.0% ([L━━━━━●H]; ABG Sundal Collier upgraded to Buy from Hold and raised PT to SEK1,000 from SEK675).

- Energy: Prysmian [PRY.IT] +3.5% ([L━━━━━●H]; likely data-centre/electrification-infrastructure sympathy alongside the European technology bid; no fresh company-specific catalyst identified).

- Healthcare: argenx [ARGX.BE] +8.0% ([L━●━━━━H]; Phase III ALKIVIA efgartigimod study met its primary endpoint in autoimmune myositis, supporting another potential FcRn indication), AstraZeneca [AZN.UK] +1.0% ([L━━●━━━H]; three fresh Phase III lung-cancer readouts: Enhertu DESTINY-Lung04 met its PFS endpoint and Tagrisso + Orpathys SAFFRON improved PFS/OS, outweighing discontinuation of eVOLVE-Lung02 after volrustomig was deemed unlikely to meet its dual primary endpoints).

- Industrials: A.P. Møller-Mærsk [MAERSK-B.DK] +5.0% ([L━━━━━●H]; continued post-results repricing after Q2 underlying EBITDA reached $3.0bn and FY EBITDA guidance was raised to $10.5–12.5bn from $8–10bn).

- Technology: STMicroelectronics [STM.FR] +3.5% [L━━━●━━H]; ASM International [ASM.NL] +3.5% [L━━━━━●H]; ASML [ASML.NL] +3.0% [L━━━━━●H]; BE Semiconductor Industries [BESI.NL] +3.0% [L━━━●━━H]; AIXTRON [AIXA.DE] +3.0% [L━━━●━━H]; Soitec [SOI.FR] +2.5% [L━●━━━━H]; Infineon [IFX.DE] +2.5% [L━━●━━━H] (likely broad semiconductor/AI-risk-on read-through from overnight Asian chip strength; European technology is outperforming, with no single fresh company-specific catalyst identified across the group).

- Telecom: Nokia [NOKIA.FI] +3.0% ([L━━━●━━H]; same-company catch-up after Nokia's U.S. ADR gained 1.9% on Friday after Helsinki had already closed).

Speakers

- Iran Foreign Ministry spokesperson: Islamabad MOU with U.S did not have 60-day deadline; Talks with Oman continuing but are long due to complexity of subject, multiple actors involved, and countries seeking to undermine process.

- South Korea's presidential Blue House: reviewing President Trump's comments about scaling back joint military drills. Would continue diplomatic consultations on U.S.-Korea military cooperation related to the Strait of Hormuz while discussing details on joint military drills with the United States.

- China stats agency NBS commented after the July economic releases that the external environment remained complex; economic foundation needed to be consolidated.

- China govt said to accelerate implementing new policy financing tools and step up support for private investment projects.

Currencies

- USD continued a soft tone in the aftermath of disappoint US retail sales data last week which shifted the outlook on US interest rates. Markets now saw approx 70% chance of a pause by the Fed at the Sept policy meeting and a 55% chance of a pause continuing at the Oct meeting. The market had been forecasting a rate hike by Oct. Re-escalating Middle East tensions failed to provide any safe-haven flows into the green back for now. Greenback hitting multi-month lows against a number of pairs.

- Oil prices remained steady amid limited progress in talks to reopen the Strait of Hormuz. Global bonds yield held onto to recent highs.

- EUR/USD hit a 6-month high as it probed above the 1.16 level. Markets await comments from ECB chief economist Lane as no ECB speak has been circulated yet in Aug.

- USD/JPY was back below the 159 level as more analysts noted that BoJ should raise rates at every meeting from Sept which echoed recent press speculation. Japanese bond yield continued thir march north climbing over 5bps inn the 10-year maturity to test above 2.91% despite a miss in Japan’s Q2 GDP data.

- The 10-year German Bund yield last at 3.20%, France 10-year Oat at 4.03% and 10-year Gilt yield at 5.02%; 10-year Treasury yield: 4.68%; 10-year JGB: 2.91%.

Economic data

- (NO) Norway July Trade Balance (NOK): 84.3B v 63.3B prior.

- (CZ) Czech July PPI Industrial M/M: 0.3% v 0.1%e; Y/Y: 1.6% v 1.4%e.

- (CN) China July New Home Prices M/M: -0.2% v -0.1% prior; Used Home Prices M/M: -0.3% v -0.3% prior.

- (CN) China July Retail Sales Y/Y: 0.6% v 1.5%e; Retail Sales YTD Y/Y: 1.2% v 1.4%e.

- (CN) China July Industrial Production Y/Y: 4.5% v 5.0%e; Industrial Production YTD Y/Y: 5.3% v 5.3%e.

- (CN) China July YTD Fixed Urban Assets Y/Y:-6.7 % v -6.2%e.

- (CN) China July Surveyed Jobless Rate: 5.2% v 5.1%e.

- (CN) China July YTD Property Investment Y/Y: -19.2% v -18.9%e; Residential Property Sales Y/Y: -13.2% v -13.7% prior.

- (CH) Swiss Weekly Total Sight Deposits (CHF): 458.8B v 462.4B prior; Domestic Sight Deposits: 433.5B v 432.6B prior.

- (TR) Turkey July Central Gov't Budget Balance (TRY): -378.1B v +114.2B prior.

- (CN) China July FX Net Settlement - Clients (CNY-denominated): 171.2B v 391.3B prior.

- (CY) Cyprus July CPI EU Harmonized M/M: % v 0.9% prior; Y/Y: % v 4.1% prior.

Fixed income issuance

- (NO) Norway sold NOK2.0B vs. NOK2.0B indicated in 6-month Bills.

Looking ahead

- (NG) Nigeria July CPI Y/Y: 15.8%e v 15.9% prior.

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

- 05:30 (IE) ECB’s Lane (Ireland, chief economist.

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

- 05:30 (NL) Netherlands Debt Agency (DSTA) to sell €2.0-4.0B in 3-month and 6-month bills.

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

- 06:00 (IL) Israel July Unemployment Rate: No est v 2.9% prior; Broad Unemployment Rate: No est v 3.7% prior.

- 06:00 (IL) Israel to sell bonds.

- 06:00 (NO) Norway announcement on upcoming bond issuance (held on Wed).

- 06:30 (TR) Turkey to sell TLREF Indexed Bonds.

- 06:30 (IN) India July Unemployment Rate: No est v 5.5% prior.

- 07:00 (BR) Brazil Aug FGV Inflation IGP-10 M/M: +0.2%e v -1.1% prior; Y/Y: 2.7%e v 2.7% prior.

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

- 08:00 (BR) Brazil Jun Economic Activity Index (Monthly GDP) M/M: -0.5%e v +0.1% prior; Y/Y: 2.3%e v 0.8% prior.

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

- 08:30 (US) Aug Empire Manufacturing: 10.5e v 15.6 prior.

- 08:30 (CA) Canada July CPI M/M: +0.4%e v -0.4% prior; Y/Y2.9%e v 2.8% prior; CPI (ex-food/energy) Y/Y: 1.8%e v 1.8% prior; CPI Core- Median Y/Y%: 1.9%e v 1.9% prior; CPI Core- Trim Y/Y%: 1.8%e v 1.8% prior; Consumer Price Index: 169.6e v 169.0 prior.

- 08:30 (CA) Canada Jun Int'l Securities Transactions (CAD): No est v 7.9B prior.

- 09:00 (FR) France Debt Agency (AFT) to sell €5.4-7.0B in 3-month, 6-month and 12-month bills.

- 10:00 (US) Aug NAHB Housing Market Index: 33e v 34 prior.

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

- 16:00 (US) Jun Total Net TIC Flows: No est v $132.2B prior; Net Long-term TIC Flows: No est v $232.7B prior.

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

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

- 20:30 (AU) Australia Aug Westpac Consumer Confidence Index: No est v 83.9 prior.

- 21:00 (AU) RBA's Jones.

- 23:00 (ID) Indonesia Jun External Debt: No est v $444.4B prior.

- 23:00 (NZ) New Zealand July Non Resident Bond Holdings: No est v 57.7% prior.

- 23:35 (JP) Japan to sell 5-year JGB Bonds.