UK GDP growth beats due to services

EU mid-market update: UK GDP growth beats due to services; Norges Bank holds with hawkish bias intact; Odds of a Sept Fed hike reduced after US CPI.

Notes/observations

- A low-catalyst European session trading off yesterday's in-line US July CPI, which weighed on yields and trimmed September Fed hike odds to around 40%, with US PPI tonight the next test. Bonds steady to firmer, European equities mixed to higher, dollar marginally firmer. Iran remains unresolved but inert, no progress on reviving the June interim deal, the US-Iran MOU deadline reportedly extendable, WTI stuck in $81-83 and Hormuz traffic at a three-month low. Khamenei appointing six new top commanders, three replacing officers killed in strikes, is a reminder the situation is stabilized rather than settled.

- UK macro data was headline strong, internals soft. June GDP rose 0.3% against a 0.1% decline expected, taking Q2 to 0.4% q/q and 1.2% y/y versus 1.1%e - but the quarter was decided in a weak April-May (May revised down), with June rescuing it. June's strength was almost entirely services, up 0.4%, flattered by hot weather and the World Cup, which argues for payback in July/August. Production dragged: IP -0.2% m/m, manufacturing -0.5%, construction -0.1%. The visible trade deficit widened to £23.0B against £20.4B expected with priors revised worse, the damage mostly non-EU on energy imports and soft exports. Business investment was the bright spot at +1.7% q/q versus -0.3%e. RICS held at -30%, weak but no worse, and former BoE deputy governor Shafik has left as chief economic adviser to the PM with no replacement named. Forward risk is external - Treasury modelling reportedly shows growth as low as 0.3% in 2027 if Hormuz disruption persists.

- Norges Bank held at 4.25%, a second straight pause, at an interim meeting with no new projections, so the signal is all in the language, and it stayed hawkish: a further hike would likely be necessary at one of the forthcoming meetings, and members agreed restrictive policy is still needed.

- Reports circulated that Japan Govt backs a September or October hike, putting October fully priced and September at 78% from 63.5%, yet the yen has given back its spike toward 160. July PPI cooled to 7.2% y/y on oil, but yen-based import prices surged 29.1% y/y - currency, not commodity, is the inflation driver.

- Yesterday, SpaceX released new Grok 4.6; it matches GPT-5.6 Sol with a score of 61 on the Artificial Analysis Intelligence Index, delivers very clear gains over Grok 4.5 on agentic coding and knowledge-work benchmarks. It uses the same 1.5T foundation as 4.5 but benefits from longer supplemental training, stronger SFT/RL, and improved self-verification so it stays coherent across multi-step tasks such as researching, codebase work, or turning ideas into polished applications. Grok 4.7, the planned next model, is a new ~2.1T parameter foundation currently in supplemental training that incorporates extensive unique SpaceX engineering data and is expected in roughly 3-4 weeks. Elon Musk has stated it will be better than 4.6 across the board (with higher token efficiency but slightly slower serving) and is positioned to exceed current models, especially on real-world engineering tasks.

- Maersk again raised FY26 underlying EBIT guidance for this FY and during earnings call said that it sees conditions in place for a full return to the Suez route during 2026 (having already restored about one-third of normal volumes via Bab-el-Mandeb since early July), though further reinstatements hinge on security and crew safety, while dismissing any meaningful role for the Arctic/Northern Sea Route. Freight rates are expected to remain volatile in a more benign overall environment, with the recent boost attributed primarily to resilient demand, strong Far East exports, and infrastructure bottlenecks rather than Red Sea or Hormuz disruptions; volume growth should increasingly track fleet growth as Gemini benefits are fully embedded and utilization is already high.

- Asia closed mixed with KOSPI higher at +3.6%. EU indices -0.3% to +0.7%. US futures +0.2%. Gold -0.7%, DXY +0.0%; Commodity: Brent -1.9%, WTI -2.0%; Crypto: BTC -0.6%, ETH -1.0%.

Asia

- Japan July PPI (domestic CGPI) M/M: 0.1% v 0.6%e; Y/Y: 7.2% v 7.4%e.

- New Zealand Q3 2-year Inflation Expectation: 2.3% v 2.5% prior.

- PBOC again skipped 7-day reverse repo operations (**Note: 3rd consecutive session). Pause being attributed to ample liquidity conditions.

- Japan PM Takaichi's Government is said to support faster BoJ rate hike [September or October.

Global conflict/tensions

- Iran Supreme Leader Khamenei said to have appointed a new set of top military commanders, with an IRGC general describing the shift as an "offensive doctrine."

Europe

- UK July RICS House Price Balance: -30% v -30%e.

Americas

- US July Federal Budget Balance:-$432.3B v -$346.0Be.

Trade

- Mexico pushing for lower auto tariffs in US trade talks [counterproposal].

- Canada and the US are not yet ready to make a tariff agreement as Canada is unsatisfied with the latest US deal proposal.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [FTSE -0.25% at 10,806.03, DAX +0.41% at 26,454.14, CAC-40 +0.35% at 8,705.50, IBEX-35 +0.71% at 20,347.45, FTSE MIB +0.42% at 53,925.00, SMI +0.40% at 14,507.10, S&P 500 Futures +0.10%].

Market Focal Points/Key Themes: European sovereign yields spent Thursday in a tight consolidation range as desks parsed a crowded data calendar, with German 10-year Bunds stuck at 3.155% and the two-year at 2.774% after recent chop. The market is caught between the temporary calm of an as-expected U.S. CPI print, which dialed back fears of immediate global tightening, and a six-day oil rally driven by Hormuz transit uncertainty that continues to embed a geopolitical inflation premium in longer-dated paper. Across the Channel, gilts mirrored the inertia—two-year at 4.310%, ten-year at 4.967%—despite Britain’s solid 0.4% Q2 GDP print, a reading that simultaneously soothes recession worries and reduces the urgency for the Bank of England to cut while investors wait for clearer fiscal signals from the new Westminster government. Equity desks, meanwhile, rewarded the sharpest operational beats—AutoStore soaring +23.5% on record revenue and an Amazon deal, Adyen and Costain each jumping +11.0% on raised guidance and a doubled dividend respectively, TKMS up +9.0% on a Bernstein upgrade, and Maersk adding +5.5% after crushing EBITDA estimates—while punishing margin or volume misses such as Marimekko’s –7.5% drop and Lanxess’s –6.0% slide after a Berenberg downgrade, underscoring how idiosyncratic results are currently driving more price action than the still-range-bound rates complex.

Equities

- Consumer discretionary: Pandora [PNDORA.DK] +4.5% (FY26 profit outlook raised; Q2 organic growth 3% vs 2% expected), Marimekko [MEKKO.FI] –7.5% (Q2 comparable operating profit –21%; margin fell to 11.7% from 14.6%).

- Consumer staples: Sixt [SIX2.DE] +5.0% (H1 record revenue +9%; net profit +28%).

- Industrials: A.P. Moller-Maersk [MAERSK-B.DK] +5.5% (Q2 EBITDA $3.0B vs $2.1B expected; FY EBITDA raised again to $10.5–12.5B; CEO comments on Suez return), Rheinmetall [RHM.DE] +1.5% (continued defence-sector momentum; no new company-specific catalyst identified this morning).

- Technology: Adyen [ADYEN.NL] +11.0% (FY26 net-revenue growth raised to 21–23%; H1 net revenue +21% and slightly beat).

- Utilities: RWE [RWE.DE] +2.0% (H1 adjusted EPS +64%; dividend target confirmed).

- Materials: Lanxess [LXS.DE] –6.0% (Berenberg downgraded to Sell; target cut to €13.80), Rio Tinto [RIO.UK] –4.0% (trades ex $2.11 interim dividend; weaker copper adds pressure), Antofagasta [ANTO.UK] –4.5% (FY copper output cut to 625–655kt after Los Pelambres weather shutdown), Fresnillo [FRES.UK] –4.0% (trades ex $0.434 interim dividend; silver/gold weaker).

Speakers

- Norway Central Bank Policy Statement reiterated its stance that would likely be necessary to raise the policy rate further at one of the forthcoming monetary policy meetings. Might still become necessary to raise rates. It was too early to conclude that the inflation outlook had changed materially since June but inflation had slowed and been lower than projected this summer.

- Turkey Central Bank (CBRT) Gov Karahan quarterly inflation report press conference stated that it would maintain tight policy stance amid war uncertainty; Indicators showed higher energy prices impact will be effective in August.

- Turkey Central Bank (CBRT) Quarterly Inflation Report (QIR) raised the end-2026 inflation from 26% range to 28% while maintaining end-2027 inflation at 15%. CBRT raised the 2026 Food Inflation forecast from 26.3% to 28.5% and maintained 2027 Food Inflation forecast at 19.0%.

- Ukraine Pres Zelenskyy reportedly losing trust in Ukraine Central Bank (NBU) Gov Pyshnyy over IMF ties.

- Japan PM Takaichi stated that Putin's visit to Etorofu made it difficult to improve relations between Japan and Russia.

Currencies

- USD price action remain subdued despite some easing of rate hike expectations among the global central banks. A string of softer inflation data over the past 24 hours pushed back fears of any immediate tightening from the Fed and others. Markets see approx 65% chance of a pause at the Sept policy meeting. Markets see just over a 50% chance of a hike occurring at the Oct meeting (if pause in Sept) with 43% for a 25bps hike and 9% chance of a 50bps hike.

- EUR/USD at 1.1520 in subdued price action. Markets saw approx 90% chance of a 25bps hike at the Sept policy meeting.

- USD/JPY at 159.35 by mid-session. Yen not capitalizing on reports that Japan PM Takaichi's Government would support faster BoJ rate hike [September or October] to stem yen weakness.

- The 10-year German Bund yield last at 3.15%, France 10-year Oat at 3.97% and 10-year Gilt yield at 4.96%; 10-year Treasury yield: 4.66%; 10-year JGB: 2.85%.

Economic data

- (SE) Sweden July PES Unemployment Rate: 3.8% v 3.6% prior.

- (UK) Jun Monthly GDP M/M: +0.4% v -0.1%e.

- (UK) Q2 Preliminary GDP Q/Q: 0.4% v 0.4%e; Y/Y: 1.2% v 1.1%e.

- (UK) Q2 Preliminary Private Consumption Q/Q: 0.3% v 0.2%e; Government Spending Q/Q: -0.3% v +0.2%e; Gross Fixed Capital Formation Q/Q: +1.2% v -0.1%e; Exports Q/Q: 0.5% v 0.3%e; Imports Q/Q: 0.5% v 0.2%e.

- (UK) Q2 Preliminary Total Business Investment Q/Q: +1.7% v -0.3%e v +0.9% prior; Y/Y: +0.8% v -1.3%e.

- UK) Jun Industrial Production M/M: -0.2% v +0.1%e; Y/Y: -0.2% v +0.3%e.

- (UK) Jun Manufacturing Production M/M: -0.5% v -0.1%e; Y/Y: 0.5% v 1.2%e.

- (UK) Jun Construction Output M/M: -0.1% v -0.4%e; Y/Y: -2.3% v -2.3%e.

- (UK) Jun Index of Services M/M: 0.4% v 0.0%e; 3M/3M: 0.5% v 0.5%e.

- (UK) Jun Visible Trade Balance: -£23.0B v -£20.4Be; Overall Trade Balance: -£5.5B v -£2.7Be; Visible Trade Balance (ex-precious metals): -£21.1B v -£19.2B prior.

- (SE) Sweden July Final CPI M/M: -0.3% v -0.3% prelim; Y/Y: 0.2% v 0.2% prelim.

- (SE) Sweden July Final CPIF M/M: -0.3% v -0.3% prelim; Y/Y: 0.7% v 0.7% prelim.

- (SE) Sweden July Final CPIF (ex-energy) M/M: 0.4% v 0.4% prelim; Y/Y: 0.6% v 0.6% prelim; CPI Level: 125.17 v 125.56 prior.

- (NO) Norway Q2 Average Monthly Earnings Y/Y: 3.9% v 4.3% prior.

- (CH) Swiss July Producer & Import Prices M/M: -0.1% v -0.3% prior; Y/Y: -2.1% v -2.1% prior.

- (ES) Spain July Final CPI M/M: 0.3% v 0.2% prelim; Y/Y: 3.6% v 3.5% prelim.

- (ES) Spain July Final CPI EU Harmonized M/M: 0.0% v -0.1% prelim; Y/Y: 3.9e v 3.8% prelim.

- (ES) Spain July CPI Core M/M: -0.1% v +0.4e; Y/Y (final): 3.0e v 3.0% prelim.

- (TR) Turkey Jun Current Account Balance: -$4.2B v -$5.0Be.

- (PL) Poland July Final CPI M/M: 0.8% v 0.8% prelim; Y/Y: 3.0% v 3.0% prelim.

- (NO) Norway Central Bank (Norges) left Deposit Rate unchanged at 4.25%; as expected.

- (CZ) Czech Jun Current Account Balance (CZK).

- (EU) Euro Zone Jun Industrial Production M/M: 0.0% v 0.0%e; Y/Y: +0.1% v -0.6%e.

Fixed income issuance

- None seen.

Looking ahead

- (CO) Colombia July Consumer Confidence: No est v 24.3 prior.

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

- 05:30 (ZA) South Africa Jun Total Mining Production M/M: +0.8%e v -5.2% prior; Y/Y: -3.4%e v -5.4% prior; Gold Production Y/Y: No est v -4.3% prior; Platinum Production Y/Y: No est v -4.4% prior.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills.

- 05:40 (UK) BOE 7-day short-term repo operation (STR).

- 06:00 (IE) Ireland July CPI M/M: No est v 0.3% prior; Y/Y: No est v 3.4% prior.

- 06:00 (IE) Ireland July Final CPI EU Harmonized M/M: No est v 0.0% prelim; Y/Y: No est v 3.1% prelim.

- 06:00 (PT) Portugal Q2 Labour Costs Y/Y: No est v 4.9% prior.

- 06:00 (IL) Israel July Trade Balance: No est v -$4.0B prior.

- 08:00 (PL) Poland Jun Current Account Balance: -€0.9Be v -€1.1B prior; Trade Balance: -€0.6Be v -€1.2B prior; Exports: €30.9Be v €30.3B prior; Imports: €31.3Be v €31.4B prior.

- 08:00 (BR) Brazil Jun Retail Sales M/M: 0.0%e v 0.1% prior; Y/Y: 2.0%e v 0.4% prior.

- 08:00 (BR) Brazil Jun Retail Sales Broad M/M: -1.4%e v -0.2% prior; Y/Y: +4.0%e v -0.6% prior.

- 08:00 (BR) Brazil CONAB Crop Report.

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

- 08:15 (US) Fed’s Hammack.

- 08:30 (US) July PPI Final Demand M/M: 0.2%e v -0.3% prior; Y/Y: 4.9%e v 5.5% prior.

- 08:30 (US) July PPI (ex-food/energy) M/M: 0.3%e v 0.2% prior; Y/Y: 4.1%e v 4.7% prior.

- 08:30 (US) July PPI (ex-food/energy/trade) M/M: 0.3%e v 0.1% prior; Y/Y: 4.6%e v 5.1% prior.

- 08:30 (US) Initial Jobless Claims: 202Ke v 199K prior; Continuing Claims: 1.80Me v 1.801M prior.

- 08:30 (US) Weekly USDA Net Export Sales.

- 08:40 (US) Fed’s Barkin.

- 09:00 (RU) Russia Gold and Forex Reserve w/e Aug 7th: No est v $720.3B prior.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 13:00 (US) Treasury to sell 30-Year Bonds.

- 15:00 (AR) Argentina July National CPI M/M: 2.0%e v 1.9% prior; Y/Y: 33.7%e v 33.5% prior.

- 17:00 (KR) South Korea July Export Price Index M/M: No est v 0.0% prior; Y/Y: No est v 48.9% prior.

- 17:00 (KR) South Korea July Import Price Index M/M: No est v -4.4% prior; Y/Y: No est v 20.6% prior.

- 18:30 (NZ) New Zealand July Manufacturing PMI: No est v 59.7 prior.

- 18:45 (NZ) New Zealand Jun Net Migration: No est v 1.86K prior.

- 19:00 (PE) Peru Central Bank Interest Rate Decision.

- 19:30 (AU) RBA’s Bullock.

- 21:10 (KR) Bank of Korea to sell KRW600B in 3-month bills.

- 22:35 (CN) China to sell 3-year, 10-year and 30-year Bonds.

- 21:30 (AU) Australia Q2 Home Loans Value Q/Q: -5.3%e v -3.8% prior; Owner-Occupier Loan Value Q/Q: No est v -4.3% prior; Investor Loan Value Q/Q: No est v -3.0% prior.

- 23:00 (KR) South Korea Jun M2 Money Supply M/M: No est v 0.8% prior; “L” Money Supply M/M: No est v 1.1% prior.

- 23:30 (JP) Japan to sell 3-Month Bills.