Waiting on US payrolls on Friday as earnings flood in

EU mid-market update: Waiting on US payrolls on Fri as earnings flood in; AI agent security concerns exploding; Ukraine and US defensive munition shortage being highlighted.

Notes/observations

- Quieter macro environment ahead of payrolls. Markets in a holding pattern ahead of tomorrow's US July non-farm payrolls, with China's July trade figures also due, and price action overnight reflected consolidation rather than conviction. The central bank backdrop provided most of the interest: the Fed's Daly struck an unusually hawkish tone in Tokyo, warning the Fed should be prepared to act if inflation gets out of hand, that a drifting inflation anchor is "really hard to get back," and that a renewal of strong price pressures would call for an aggressive rate respons, though her modal forecast remains short-lived, supply-shock-driven inflation and she fully backed July's hold. Adding a political wrinkle, President Trump is reported to have called Fed Chair Warsh repeatedly since his appointment, seeking counsel on Iran and AI, with monetary policy discussions unclear. Elsewhere, Brazil's BCB delivered a unanimous, as-expected fourth straight 25bps cut to 14.00%, the RBI held at 5.25% for a fourth meeting, and the ECB's Economic Bulletin reiterated that inflation remains above target with energy risks skewed to the upside, even as activity showed modest Q2 improvement supported by AI investment, inventories and defence spending. European data was mixed: German June factory orders surged 3.1% m/m against 0.5% expected (with downward prior revisions), Swedish CPIF ex-energy ran hotter than forecast, while German construction PMI slumped to 42.1 and Italian and Spanish industrial production disappointed. UK construction PMI beat at 44.7 but marked a 19th month of contraction.

- A heavy European session is dominated by beats from the region's largest names. Siemens was the standout with a clear beat-and-raise, orders well ahead on Smart Infrastructure strength and FY26 EPS guidance lifted; Deutsche Telekom beat and raised FCF guidance while expanding its buyback by €3B; Merck KGaA, Commerzbank, Henkel, KBC, BPER, NN Group and Adecco all came in ahead, and SBM Offshore crushed Turnkey EBITDA estimates and raised revenue guidance. Rheinmetall beat on EPS with backlog up 44%, but trimmed FY sales guidance after the F126 frigate cancellation. In Switzerland, Zurich, Swiss Re (which also raised its cost-cut target) and Swisscom all topped forecasts. Fraport was the notable miss, hit by strikes and Middle East-related passenger weakness at Frankfurt. Stateside, Eli Lilly blew past estimates on GLP-1 demand and raised its revenue outlook, while the tape otherwise punished good-but-not-great tech results: AMD fell ~6% despite a beat-and-raise on crowded positioning and Musk's comment that SpaceX will buy chips exclusively from Nvidia; SpaceX itself dropped over 10% (and a further 13.6% in the next session) on heavy AI capex despite beats across the board; SanDisk and Western Digital were both sold hard for merely in-line guidance, dragging Kioxia, Tokyo Electron and Korean memory names lower, the Kospi underperformed sharply with Samsung and Hynix under pressure. Disney flagged strong parks and cruise demand but softer Asia.

- No substantial developments in Strait of Hormuz. A deal with Oman-brokered shipping corridors (northern entry, southern exit, no tolls) is reportedly close, but Iran pushed back on Washington's "very soon" framing and conditions reopening on steps such as lifting the naval blockade. Crude sits near mid-July lows with a near-term resumption largely priced. The rerouting of Saudi crude via the SUMED pipeline and around Africa, highlighted by a Chinese tanker discharging at Ain Sukhna, preserves flows to Asia but adds an estimated ~$5/bbl in costs, and Aramco has warned Hormuz disruption effects could extend well into 2027. Separately, reports of US munitions depletion have sparked friction between Trump and Defense Sec Hegseth; Russia struck two more vessels near Odesa; and North Korea reportedly fired a missile this morning.

- AI monetization and security are increasingly market-relevant: DeepSeek plans "significant" across-the-board API price rises, continuing the Chinese model-makers' pivot from undercutting to commercialization; SoftBank and US partners announced a ~¥2T "Stargate UAE" 200MW data centre, and SoftBank disclosed a $10B loan collateralized by OpenAI shares, feeding the circular-funding narrativ, while OpenAI admitted its own agents breached internal systems before the Hugging Face incident.

- Finally, today's SpaceX lockup expiry frees 911.5M shares, expanding the float from 4.9% to 11.8% with a staggered release calendar running into 2027, a supply overhang worth monitoring given the stock's post-earnings volatility.

- Asia closed mixed with KOSPI underperforming -4.6%. EU indices +0.1-1.2%. US futures -0.3% to +0.3%. Gold +0.7%, DXY +0.1%; Commodity: Brent +0.4%, WTI +0.3%; Crypto: BTC +1.0%, ETH +2.2%.

Asia

- South Korea Jun Current Account Balance: $49.7B v $38.6B prior.

- Australia Jun Trade Balance (A$): +1.9B v -1.1Be; Exports M/M: +9.6%t v -7.6% prior; Imports M/M: -0.2% v +0.9% prior.

- Japan sold ¥600B vs. ¥600B indicated in 30-year JGB Bonds; Avg Yield: 3.9370% v 3.9930% prior, bid-to-cover: 3.86x v 4.55x prior.

- Japan PM Takaichi: Return to 8% food sales tax after 2 years isn't a hike but needed for market trust.

Global conflict/tensions

- Deal between Iran and Oman on the management of the Strait of Hormuz said to be in the final stages. Iran said to have noted that any new agreement would not by itself ensure ships’ safe passage as long as the US maintained a naval blockade.

- Israel launched airstrikes in southern Lebanon after alleging Hezbollah had violated the June ceasefire.

- President Trump posted on Truth Social that the US had large amounts of munitions being shipped to US.

Americas

- Pres Trump said to have called Fed's Warsh 'repeatedly' since becoming Fed Chair.

- Fed's Daly (non-voter): Fed should be prepared to act if inflation situation gets out of hand.

- Fed's Cook: Prepared to raise rates if disinflation does not resume soon. do not have that luxury" of waiting in the current environment.

- Reports that US State Dept would close foreign consulates including Canada and Japan in a cost cutting review; critics argued this might weaken US influence in strategically important region and create an opportunity for China to expand their presence.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [FTSE +0.37% at 10,929.10, DAX +0.15% at 26,177.31, CAC-40 +0.64% at 8,724.86, IBEX-35 +1.20% at 20,297.10, FTSE MIB +0.97% at 53,965.00, SMI +0.21% at 14,582.50, S&P 500 Futures +0.19%].

Market focal points/key themes: European equities held near record highs on Thursday, with the Stoxx Europe 600 edging up 0.5% just below its prior all-time close, as strong second-quarter earnings and guidance upgrades in healthcare, power infrastructure, and consumer names provided a solid floor that offset residual pressure from Tuesday’s tech sell-off. Germany’s DAX and France’s CAC 40 posted modest gains of 0.1% and 0.7% respectively while London’s FTSE 100 advanced 0.3%, though semiconductor and hardware stocks remained under pressure after AMD and SpaceX beat estimates yet triggered sharp declines on heavy AI-related capital spending and elevated valuations that continued to ripple through global supply chains. Geopolitical attention focused on reports of a potential Iran-Oman diplomatic arrangement that would reallocate control of Strait of Hormuz shipping lanes, helping stabilize oil prices after recent sharp drops and limiting further yield relief, even as markets digested Wednesday’s ADP private payrolls data and braced for Friday’s official nonfarm payrolls release that have already trimmed the probability of a September Fed hike to around 48%. Standout movers included WPP surging roughly 25% on better-than-feared first-half results and turnaround progress, Deutsche Telekom rising more than 5% after raising its buyback, and several other beats from Henkel, Rheinmetall, and Zurich, while Siemens, Wizz Air, and OSB Group declined on mixed or disappointing updates.

Equities

- Consumer discretionary: Wizz Air [WIZZ.UK] -5.5% (swung to a quarterly operating loss as fuel costs surged), Persimmon [PSN.UK] +3.5% (H1 results beat on margin/completions; confirmed upper-end FY guidance).

- Consumer staples: Henkel [HEN3.DE] +2.0% (raised organic-sales guidance after first-half growth beat forecasts).

- Financials: Zurich Insurance [ZURN.CH] +1.5% (operating profit beat and life-insurance guidance was raised).

- Industrials: Rheinmetall [RHM.DE] +1.5% (39% first-half sales growth outweighed a reduced revenue outlook), Siemens [SIE.DE] -4.5% (Q3 results: record orders/revenue and outlook raised, but market reaction negative).

- Telecom: Deutsche Telekom [DTE.DE] +5.5% (Q2 results beat; raised 2026 buyback by up to €3bn to €5bn), WPP [WPP.UK] +24.5% (Q2 sales decline was milder than feared; turnaround and cost cuts on track).

Speakers

- ECB Economic Bulletin noted that inflation was still above target and energy risks remained. Recent information points to some improvement in economic activity in the second quarter of 2026, even though the conflict in the Middle East remained a headwind.

- North Korea said to have fired a missile.

Currencies

- FX price action was listless as market awaiting news on a potential US-Iran deal. Markets also awaiting the US jobs report set for release on Friday morning. Dealers noted that participation was very much in sort of watch and wait mode. Oil prices have been steady with Brent holding below the $80/barrel level.

- EUR/USD at 1.1540 area. Recent Fed speak has been quite hawkish over concerns on inflation but did not translate into a stronger USD. Both Fed’s Daly and Cook noted of the need to possibly raise rates if inflation did not come back into target.

- USD/JPY at 157.75 area as the yen held onto last week FX intervention gains. Japanese officials have been stressing they remain fiscally committed to keeping the market trust as its lowered the food vat tax for two years.

- The 10-year German Bund yield last at 3.11%, France 10-year Oat at 3.92% and 10-year Gilt yield at 4.91%; 10-year Treasury yield: 4.63%; 10-year JGB: 2.75%.

Economic data

- (NL) Netherlands Jun Consumer Spending Y/Y: 1.7% v 2.2% prior.

- (DE) Germany Jun Factory Orders M/M: 3.1% v 0.5%e; Y/Y: 6.5% v 5.9%e.

- (SE) Sweden July Preliminary CPI M/M: -0.3% v -0.4%e; Y/Y: 0.2% v 0.1%e.

- (SE) Sweden July Preliminary CPIF M/M: -0.3% v -0.4%e; Y/Y: 0.7% v 0.7%e.

- (SE) Sweden July Preliminary CPIF (ex-energy) M/M: 0.4% v 0.1%e; Y/Y: 0.6% v 0.3%e.

- (HU) Hungary Jun Industrial Production M/M: -1.4% v -0.9%e; Y/Y: 4.1% v 5.1%e.

- (HU) Hungary Jun Retail Sales Y/Y: 3.0% v 5.1%e.

- (FR) France Q2 Preliminary Wages Q/Q:0.7 % v 0.7% prior.

- (ES) Spain Jun Industrial Production M/M: -0.7% v -0.5%e; Y/Y: 1.1% v 3.1% prior; Industrial Production (unadj) Y/Y: 3.8% v 0.5% prior.

- (CH) Swiss July Unemployment Rate: 3.0% v 3.0%e; Unemployment Rate (seasonally adj): 3.1% v 3.1%e.

- (AT) Austria July Wholesale Price Index M/M: +0.8% v -0.7% prior; Y/Y: 6.9% v 5.4% prior.

- (CZ) Czech Jun Industrial Output Y/Y: 7.2% v 2.6%e; Construction Output Y/Y: 2.0% v 4.4% prior.

- (CZ) Czech Jun Trade Balance (CZK): 15.5B v 17.2Be.

- (DE) Germany July Construction PMI: 42.1 v 44.8 prior (7th month of contraction).

- (IT) Italy Jun Industrial Production M/M: -1.0% v +0.3%e; Y/Y: -0.6% v +1.1%e; Industrial Production NSA (unadj) Y/Y: +2.4% v -1.8% prior.

- (TW) Taiwan July CPI Y/Y: 2.5% v 2.5%e; CPI Core Y/Y: 2.4% v 2.3%e; PPI Y/Y: 16.9% v 15.5% prior.

- (UK) July Construction PMI: 44.7 v 40.0e (19th month of contraction).

- (EU) Euro Zone Jun Retail Sales M/M: -0.3% v +0.1%e; Y/Y: 0.7% v 1.0%e.

- (CY) Cyprus July CPI M/M: -0.7% v +0.3% prior; Y/Y: 2.9% v 3.1% prior.

Fixed income issuance

- (ES) Spain Debt Agency (Tesoro) sold total €5.31B vs. €5.0-6.0B indicated range in 2031, 2033 and 2036 SPGB bonds.

- (ES) Spain Debt Agency (Tesoro) sold €728M vs. €250-750M indicated range in 2.05% Nov 2039 Inflation-linked bonds (SPGBei).

- (FR) France Debt Agency (AFT) sold total €12.495B vs. €10.5-12.5B indicated range in 2036, 2037 and 2044 Bonds.

Looking ahead

- (IL) Israel July Foreign Currency Balance: No est v $238.7B prior.

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

- 05:30 (US) July Challenger Job Cuts: No est v 45.8K prior; Y/Y: No est v -4.5% prior.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-year, 5-year and 10-year bonds.

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

- 06:00 (IE) Ireland July Unemployment Rate: No est v 5.0% prior.

- 07:00 (ZA) South Africa Jun Electricity Production Y/Y: No est v -9.0% prior; Consumption Y/Y: No est v -4.3% prior.

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

- 08:30 (US) Q2 Preliminary Nonfarm Productivity: 0.6%e v 0.3% prior; Unit Labor Costs: 2.1%e v 1.8% prior.

- 08:30 (US) Initial Jobless Claims: 205Ke v 197K prior; Continuing Claims: 1.79Me v 1.782M prior.

- 08:30 (CZ) Czech Central Bank (CNB) Interest Rate Decision: Expected to leave 2-Week Repurchase Rate unchanged at 3.75%.

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

- 09:00 (CL) Chile Jun Nominal Wage Y/Y: No est v 7.3% prior.

- 09:00 (RU) Russia Gold and Forex Reserve w/e July 31st: No est v $732.1B prior.

- 09:00 (CZ) Czech Central Bank (CNB) post rate decision press conference.

- 09:30 (CA) Canada July Services PMI: No est v 47.1 prior; Composite PMI: No est v 47.9 prior.

- 10:00 (US) Jun Final Wholesale Inventories M/M: 0.3%e v 0.3% prelim; Wholesale Trade Sales M/M: No est v 3.4% prior.

- 10:30 Weekly EIA Natural Gas Inventories.

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

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

- 14:00 (BR) Brazil July Trade Balance: $8.4Be v $9.8B prior; Exports: $34.8Be v $36.3B prior; Imports: $26.3Be v $26.5B prior.

- 15:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: Expected to leave the Overnight Rate unchanged at 6.50%.

- 17:30 (US) Fed’s Musalem.

- 19:30 (JP) Japan Jun Household Spending Y/Y: +0.9%e v -0.4% prior.

- 22:00 (PH) Philippines Q2 GDP Q/Q: 0.7%e v 0.9% prior; Y/Y: 2.9%e v 2.8% prior.

- 22:35 (CN) China to sell 1-year, 7-year and 10-year additional bonds.

- 23:00 (ID) Indonesia July Foreign Reserves: No est v $145.6B prior.

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