Sentiment in global markets is being shaped by the escalation of the conflict in the Middle East and mixed results from the technology sector. Another series of U.S. strikes on Iran and Houthi attacks on Saudi tankers have increased fears of simultaneous disruptions to shipping through the Strait of Hormuz and the Red Sea. Iran is also reported to have repeatedly rejected mediation attempts by Gulf states. Brent remains above USD 100 per barrel.
Rising energy prices are again lifting inflation expectations and bond yields. The market is pricing a 30–40% probability of a Fed rate hike. At the same time, sell-offs in Alphabet and Tesla, linked to rising AI spending and deteriorating cash flows—are keeping pressure on the tech sector.
The large-scale declines in yesterday’s session, combined with the absence of new negative news to price in, are leading futures on the main indices to recover part of yesterday’s losses.
Today’s calendar focuses on preliminary PMI indices for Europe and the U.S. The data will help assess whether the jump in energy prices is already starting to constrain economic activity.
Key releases from Asia
- Japan CPI inflation came in at 1.7% y/y in June vs. 1.5% previously, in line with consensus. Core inflation rose from 1.4% to 1.6%.
- Japan manufacturing PMI was 54.7 in July vs. 54.5 expected. Services PMI, however, fell from 52.2 to 51.9.
- Australia Composite PMI rose from 50.4 to 52.6. Services PMI reached 53.0, and manufacturing 51.7.
- India PMI fell from 57.1 to 54.3, the lowest level in more than four years. Services PMI dropped from 57.4 to 53.1.
Calendar for today
- 08:00 - Germany: Consumer Confidence : -29.6 (Expected: -28.5, Previous: -29.3)
- 08:00 – United Kingdom: Retail sales (June): 1.0% m/m and 4.2% y/y (Expected: -0.3% m/m and 2.3% y/y. Previous: 1.2% m/m and 3.5% y/y)
- 09:15 – France: (preliminary) PMI indices (July):
- Manufacturing: 50.0 pts (Expected: 51.0)
- Services: 49.8 pts (Expected: 47.5)
- Composite: 49.6 pts (Expected: 47.8)
- 09:30 – Germany: (preliminary) PMI (July):
- Manufacturing: 52.2 pts (Expected: 50.5)
- Services: 49.6 pts (Expected: 49.0)
- Composite: 51.2 pts (Expected: 49.8)
- 10:00 – Eurozone: (preliminary) PMI (July):
- Manufacturing: (Expected: 51.5 pts. Previous: 51.4)
- Services: (Expected: 49.8; Previous: 49.4)
- Composite: (Expected: 50.3; Previous: 50.0)
- 10:30 – United Kingdom: (preliminary) PMI (July):
- Manufacturing: (Expected: 52.0; Previous: 52.5)
- Services: (Expected: 49.4; Previous: 48.8)
- 14:30 – Canada: PPI (June): (Expected: -0.4%; Previous: 1.2%)
- 15:45 – USA: (preliminary) PMI (July):
- Manufacturing: (Expected: 54.3. Previous: 53.9)
- Services: (Expected: 51.5 pts. Previous: 51.2)
- 16:00 – USA: New home sales (June) (Expected: 610k. Previous: 580k)
Earnings calendar Before the U.S. market opens:
- American Express
- Verizon Communications
- NextEra Energy
- HCA Healthcare
- SLB
3 markets to watch
- Brent – Oil remains the key carrier of geopolitical and inflation risk. Holding above USD 100 could further push up bond yields and expectations of rate hikes.
- DE40 – The index will react to the surprisingly strong German manufacturing PMI, but this support is offset by high energy prices and weak services. The Eurozone composite PMI will be crucial.
- USD/JPY – The pair remains near multi-year highs thanks to rising U.S. yields. Further dollar strength increases the likelihood of FX intervention by Japanese authorities.
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