US equity futures point to a firmer cash open as traders return from the long weekend, but the bigger question is whether investors continue to rotate out of the crowded AI trade and into the broader market.  As of 8:00am ET, S&P futures rise 0.4%, while Nasdaq 100 contract rise 1.1% as most Mag 7 names are in the green.  In premarket trading, chip/memory stocks rebound from last week's rout which follows the an 18% plunge in the GS High Beta Momentum (GSPRHIMO) basket over the last two sessions, on track for 2nd worst month in >15 years. This follows an APAC session on Monday which took a more downbeat view of the tech sector; South Korea’s Kospi index fell, having gained as much as 3% earlier. Memory chipmaker Samsung Electronics’s preliminary earnings Tuesday will provide further clues on demand for AI infrastructure and the durability of the sector’s growth narrative. The MSCI APAC index fell as much as 0.7% before returning to the unchanged mark. The Stoxx 600 has just slipped into negative territory, down 0.1%, after hitting another record high earlier in the session. The Bloomberg Dollar Spot Index is up 0.2% with the greenback firmer versus most G10 peers. Gains are most pronounced against the yen with USD/JPY venturing as high as 162.31 but still below last week’s multi-decade peak at 162.84. Treasuries are seeing a modest bid with the 10-year yield down 2 basis points at 4.46%. Oil prices fell as flows through the Strait of Hormuz persisted and OPEC+ signaled higher supplies, with Brent trading about 0.4% lower at $71.82 a barrel. Precious metals are on the back foot with spot gold and silver posting respective losses of 0.8% and 0.7%. Bitcoin is down 0.1%. Today's US economic data calendar includes June final S&P Global US services PMI (9:45am) and June ISM services (10am). Fed speaker slate includes Waller at 11am

In premarket trading, Mag 7 names are mostly higher (Meta +1.4%, Tesla +1.3%, Amazon +0.7%, Alphabet +0.5%, Nvidia +0.3%, Microsoft is unchanged, Apple -0.6%). Chipmakers and other AI-related firms rise ahead of Samsung’s June quarter earnings and updates to SK Hynix Inc.’s massive ADR listing.

• Alibaba ADRs (BABA) inch about 1% higher after a federal judge ordered the Pentagon to give the company a reprieve from a law that caused all of its lobbyists to drop it as a client.
• Datadog (DDOG) falls 2.4% after Bernstein downgraded the software company to market perform, citing caution about the company’s earnings prospects.
• JB Hunt (JBHT) slips 1% after Morgan Stanley cut the recommendation on the freight carrier to underweight, saying the stock’s valuation is “unjustifiable” after a rally.
• Kosmos Energy (KOS) rises 4% after the firm provided updated guidance with second-quarter production at its Jubilee oil field in Ghana reaching about 72,000 barrels of oil per day.
• Opus Genetics (IRD) rises 2% after saying it reached alignment with the FDA on the design of its Phase 3 trial evaluating OPGx-LCA5 for LCA5-associated inherited retinal disease.
• Seer (SEER) climbs 33% after CEO Omid Farokhzad offered to buy the a biotechnology company.
• Zim Integrated’s US shares (ZIM) are down 6% after Ynet reported Sunday that Prime Minister Benjamin Netanyahu said a proposed sale was “not on the agenda,” without clarifying how it got the information.

This week presents key tests for tech leadership. SpaceX joins the Nasdaq 100 on Tuesday, likely prompting index-related repositioning. That same day, Samsung’s preliminary earnings are due. Then on Friday comes SK Hynix’s Nasdaq listing, which could be the biggest-ever first-time share sale by a foreign company. 

The events will take on added significance in a week that features a thin data calendar, while the US earnings season is yet to kick into gear. Global stocks have gone through a stretch of uneven trading as investors question whether the past quarter’s AI-driven rally has run too far and whether vast capital outlays are guaranteed to produce strong returns.

The macro calendar picks up on Wednesday with minutes from the Fed’s June meeting. They take on added significance after Warsh shortened the policy statement and declined to contribute to rate forecasts. Bloomberg Economics’ Andrew Sacher expects the account to reinforce the commitee’s focus on above-target inflation and its preference to preserve the option of further tightening. Further detail about Fed-think will likely guide equity positioning into the upcoming earnings season. BNY strategist Geoffrey Yu says the question is whether the Fed can stay patient without seeing inflation risks reemerge. 

Separately, SpaceX is due to join the Nasdaq 100 on Tuesday, an inclusion that may trigger some index-related repositioning.

“Speculative positioning in semiconductors and other hot technology themes is likely to continue being reduced,” said Roberto Scholtes, head of strategy at Singular Bank. “The key question will be whether this triggers a rotation into lagging sectors or a broader correction.”

Morgan Stanley’s Michael Wilson thinks the market broadening story continues to gain momentum as chips underperform; he believes US stocks will struggle to reach new highs as investors rotate out of some of this year’s biggest tech trades. Wilson says momentum is fading in semiconductor stocks as investors shift toward laggards, including AI hyperscalers.  The steep fall in oil has helped to stabilize rates, which is another driver of the rotation to lagging areas of the market, he adds. He favors AI hyperscalers, consumer discretionary goods, transports, and biotech.

For Kokou Agbo-Bloua, global head of research at Societe Generale Corporate and Investment Banking, the market is increasingly learning to live with short-term volatility. “I wonder whether the market is becoming a bit more anti-fragile, in the sense of adapting the news flow and seeing through the noise and focusing on the fundamentals, especially with the whole AI boom and the ecosystem around it,” he said.

In a week with few major data releases, the key variable for Treasuries would be oil prices, said Francisco Simon, European head of strategy at Santander Asset Management. “Specifically, whether the recent downward trend remains in place and whether the newsflow around energy markets continues to stabilize,” Simon said. “Central bank communication could also move markets, although in the absence of significant new developments we would not expect a major shift in tone.”

Defense is also back on traders’ radar ahead of the two-day NATO summit starting in Turkey tomorrow. Trump meets Ukraine’s Zelenskyy there on Wednesday.

European shares slip following Friday’s record close. Stoxx 600 falls 0.2% to 651.15 as investors digest a slate of M&A news, with EasyJet jumping after agreeing to a takeover offer from Castlelake. ITV rose after agreeing to sell an arm to Sky, while Thales has said it wants to buy Exail. Media stocks are outperforming, followed by autos. Utilities and construction sectors are the biggest laggards. Here are some of the biggest movers on Monday:

• EasyJet shares jump as much as 11% after the budget airline accepted a takeover offer from US private equity firm Castlelake at 690p a share.
• Carlsberg shares gain as much as 3.7% after the Danish brewer and Sapporo agreed to form a strategic joint venture.
• DWS and Amundi shares rise to record highs after Morgan Stanley and Citi raise their price targets on the asset management firms.
• Schott Pharma jumps as much as 11% after Deutsche Bank upgraded the stock to buy from hold, citing accelerating growth for the German pharma packaging company in 3Q and 4Q, accompanied by improving margins.
• Nemetschek shares rise as much as 5.7% after Deutsche Bank resumed coverage of the software company with a buy recommendation.
• ITV shares rise as much as 2.4% after the company agreed to sell its Media and Entertainment arm to Sky.
• JCDecaux shares rise as much as 3.8% as Oddo BHF (outperform) says it expects the outdoor advertising company’s second-quarter results to turn out better than expected due to the end of the conflict in the Middle East.
• OC Oerlikon gains as much as 9.5% as Oddo BHF upgrades the Swiss industrial technology company to outperform from neutral on increased estimates for FY26 that exceed the company’s own guidance.
• Exail shares rise as much as 4.2% after Thales said it intends to make a tender offer for the French maker of mine-destroying sea drones following its agreement to buy the Gorgé family’s 35.51% stake.
• BE Semiconductor shares slip as much as 7.7% on Monday after South Korea news outlet ZDNet reported that chipmakers may further delay the full adoption of an advanced chip packaging technology.
• Close Brothers Group declined as much as 9.3%, after JPMorgan downgraded to sector perform from outperform, saying that the UK motor finance issue has become increasingly uncertain.

Stocks in Asia fluctuated, with Samsung Electronics to come under scrutiny when the chipmaker releases earnings on Tuesday after a 165% year-to-date rally. The report will be followed days later by SK Hynix Inc.’s $28 billion US listing.  The MSCI Asia Pacific Index swung between narrow gains and losses. South Korea’s Kospi index fell, having gained as much as 3% earlier. Memory chipmaker Samsung Electronics Co.’s preliminary earnings Tuesday will provide further clues on demand for AI infrastructure and the durability of the sector’s growth narrative. “The market is in a holding pattern ahead of Samsung’s preliminary results, which is the centerpiece of what’s shaping up to be a semiconductor super week,” said Dilin Wu, a strategist at Pepperstone Group. If the results disappoint, “the conversation shifts to whether this is a cyclical pause or the beginning of something more structural.”  Bucking the trend, Chinese stocks listed in Hong Kong rose for a third day, up more than 1%. Tencent Holdings was the top contributor, after JPMorgan said it expects its stock to rebound thanks to its AI agent launch in Weixin. Japan’s Topix index rose to another all-time high, supported by defense stocks on signs of government policy tailwinds.  In South Korea, the government is looking at creating an investment fund using excess tax revenue from the semiconductor industry to finance long-term economic growth, according to a senior official. Investors are also turning their attention to SK Hynix Inc.’s listing of $29 billion American depositary receipts later this week. Here Are the Most Notable Movers

• Tencent shares rise after JPMorgan said it expects the company’s stock price to rebound thanks to its AI agent launch in Weixin. Chinese brokerage stocks rise on earnings optimism.
• Shares of Sanrio, owner of the Hello Kitty brand, climbed 6.2% after an analyst report touted an increase in social media followers of its intellectual property.
• Shares of Kanzhun rise as much as 4.8% after JPMorgan initiates coverage on its H-share with an overweight rating, saying AI will be a major driver in increasing the online recruitment company’s long-term average revenue per use.
• Shenzhen Xunce Technology shares rise as much as 15% in Hong Kong after the company said it entered into a MOU on strategic cooperation with Gechuang Dongzhi (Shenzhen) Technology to expand data tokenization capabilities into industrial smart manufacturing.
• Shanghai Biren Technology shares fall as much as 9.9% to the lowest since May 19 after the company raised HK$7.07 billion ($901 million) in gross proceeds by placing 153 million new H shares at HK$46.20 each.

In FX, the Bloomberg Dollar Spot Index is up 0.2% with the greenback firmer versus most G10 peers. Gains are most pronounced against the yen with USD/JPY venturing as high as 162.31 but still below last week’s multi-decade peak at 162.84. The yen lost ground against all major currencies as traders tested the resolve of Japanese authorities to intervene. Goldman Sachs joined the growing ranks of investors and strategists who are increasingly bearish on the yen, which is already trading around its lowest levels since 1986. The Wall Street bank revised its 12-month forecast to 165 from 155, reflecting fiscal pressures in Japan, higher-for-longer Treasury yields and only gradual rate hikes from the Bank of Japan, strategist Karen Reichgott Fishman noted.  

In rates, treasuries are seeing a modest bid with the 10-year yield down 2 basis points at 4.46%. Treasury futures hold small gains accumulated during Asia session and London morning, led by front-end and belly tenors as oil prices remain near three-month lows and stock futures advance. US intermediate yields are 3bp-4bp richer on the day, steepening 5s30s spread by 2.5bp; 10-year, around 2bp richer near 4.46%, outperforms bunds and gilts in the sector by 2bp and 2.5bp respectively. IG dollar issuance slate includes a few names already. Dealer forecasts for this month are around $100 billion, with around $25 billion lined up for this week. This week’s Treasury auctions start Tuesday with $58 billion 3-year new issue, followed by $39 billion 10-year and $22 billion 30-year reopenings Wednesday and Thursday. US session includes June ISM services gauge and scheduled remarks by Federal Reserve Governor Christopher Waller. 

In commodities, WTI oil is holding below $69 a barrel after seven OPEC+ members agreed on Sunday to increase their collective production quotas by a modest 188,000 barrels a day for next month, adding to the prospect of more supply eventually hitting the market if a US-Iran peace pact can stick. Shipping through a US-protected corridor in the Strait of Hormuz showed signs of recovery. Precious metals are on the back foot with spot gold and silver posting respective losses of 0.8% and 0.7%. Bitcoin slides back under $62000 on news Michael Saylor's Strategy sold 3,588 in the past week.   

US economic data calendar includes June final S&P Global US services PMI (9:45am) and June ISM services (10am). Fed speaker slate includes Waller at 11am. Bloomberg Economics expects the ISM services index to have remained in expansionary territory, but to have softened after jumping to 54.5 in May. A modest decline in orders growth likely led to a deceleration in production activity.

Market Snapshot

Top Overnight News

• Shipping along a US-protected corridor near Oman in the Strait of Hormuz recovered after some vessels earlier performed unexplained U-turns and detours. OPEC+ backed another modest rise in quotas for next month. BBG
• Ukraine is striking Russian energy infrastructure at an unprecedented rate, according to an FT data analysis showing that Kyiv’s intensified drone campaign is spurring Russia’s worst fuel crisis in decades. FT
• Ukraine’s capital Kyiv came under a deadly Russian attack early Monday morning, on the eve of a critical NATO summit in Turkey that US President Donald Trump plans to attend. CNN
• World powers are pouring billions into AI, drones, hypersonic missiles and space technologies in a race to dominate the battlefields of the future. BBG
• A year ago, the message from many business leaders was that AI was going to wipe out jobs. For the past month or so, tech CEOs have been striking a more optimistic tone. WSJ
• South Korea is looking at creating an investment fund using excess tax revenue from its chip industry to finance long-term economic growth. BBG
• Chinese tech giants including Alibaba, ByteDance and Tencent have all announced plans to disable AI persona features as Beijing tightens its regulatory framework on the rapidly advancing AI industry. Nikkei
• The yen should be about 20% stronger at around 130 per dollar, former Japan currency chief Tatsuo Yamasaki said. BBG
• Large investors are committing billions of dollars to private credit funds as big institutions seek to profit from an exodus of smaller retail clients. North American direct lending funds that seek to attract institutional clients raised at least $16bn in the second quarter. FT
• Goldman Sachs sees USD/JPY at 165.00 in a year's time, raising its forecast from 155.00, citing Japan's interest rate differentials with the US

A more detailed look at global markets courtesy of Newsquawk

Asia-Pac stocks initially started the session with broad gains but reversed as the session continued, with a busy week ahead, which includes Samsung Electronics' Q2 earnings and SK Hynix's US listing. ASX 200 managed to limit its downside, and only posted modest losses, as upside in Energy and Health Care broadly offset the downside seen in Consumer Staples and Mining names. Further on the mining topic, Genesis Minerals made a AUD 5.6bln bid for Vault Minerals, hijacking a deal previously made with Regis Resources. Nikkei 225 was softer as it continued to pull back from its ATH of 72,832. Kioxia was one of the big underperformers, after the Co. began shipping sample next-gen semiconductor products. KOSPI was under significant pressure, despite initially printing gains of as much as 2.9%, with Samsung set to report Q2 figures on Tuesday; operating profit expected to print at KRW 86tln. However, a miss would be detrimental to tech valuations, since doubts have crept in over the scale and durability of AI demand and capex. Shanghai Comp. traded either side of the unchanged mark while the Hang Seng posted decent gains. Alibaba found some comfort after a US federal judge ordered the Pentagon to give the Co. a reprieve from a lobbying ban tied to the Pentagon's curbs on Chinese companies.

Top Asian News

• Apple (AAPL) supplier Luxshare (002475 CH) reportedly plans pricing its Hong Kong listing at the top end, Bloomberg reported.
• SK Hynix (000660 KS) is to raise KRW 43tln in ADR listing.
• Meituan's (3690 HK) LongCat-2.0 has been officially open-sourced, and domestic chip manufacturers are collectively adapting to it, Chinese press reported.
• Honda's (7267 JT) China unit reported June vehicles sales of 32.5k units, -44.5% Y/Y.

European bourses (STOXX 600 -0.2%) have traded on either side of the unchanged mark throughout the morning, with a lack of pertinent catalysts driving the action. European sectors are mixed but with a positive bias. Leading the table is Media, helped by ITV (+1%), Travel and Leisure is helped by easyJet (+10%), while European tech underperforms after modest losses in APAC (ASML -1.5%, STMicroelectronics -1.5%). For easyJet, the co. agreed in principle to Castlelake’s fifth takeover bid, at GBP 6.90/shr in cash. Stateside, futures play catch-up after US stocks were closed on Friday for US Independence Day. NQ +1% outperforms after broad tech gains on Friday, ES +0.4%, and RTY +0.2% also green.

Top European News

• UK Defence Minister Jarvis told POLITICO he wants Burnham’s administration to lay out the full pathway to spending 3.5% of GDP on defense at the next spending review, due spring 2027.
• France is said to have softened its stance of possible sale of SAMP/T air defence system (HO FP) to Turkey, according to sources.
• CVC's (CVC NA) sale of marina group D-Marin is said to be valued at EUR 1-1.5bln, FT reported, citing sources

FX

• Lack of macro catalysts with geopolitical news light as US-Iran negotiations pause for the former Supreme Leader’s funeral processions. The Buck today is seemingly attracting carry demand as we near summer trade, where ING notes G7 FX volatility is close to the lower end of long-term ranges. DXY currently trades near highs, within a 100.82 to 101.13 range.
• JPY is the clear underperformer, as it attempts to return to recent lows against most peers. Specifically, USD/JPY +0.5% on the day as the Buck outperforms against low yielders and after unconvincing potential intervention over the past week. USD/JPY sees its first resistance at 162.50 to the upside; thereafter, the next significant level is the 1st July high of 162.84.
• Antipodeans are mixed, Aussie outperforms as it attracts carry demand as mentioned above, while Kiwi is one of the G10 laggards as hawkish bets unwind ahead of the RBNZ policy announcement on Wednesday. Ahead of the meeting, the NZIER Shadow Board recommended that the RBNZ hold the OCR at 2.25%, against the market consensus of a 25bp hike to 2.50%. AUD/NZD +0.4% and approaches 1.2200.
• South Korean Finance Minister said the BoK is to closely monitor the impact and movements of KRW's 24-hour trade.

Fixed Income

• Global fixed benchmarks are mildly firmer this morning, taking leads from lower energy prices. Price action has been fairly lacklustre this morning, with the European session ultimately seeing sideways action.
• USTs (+4 ticks) are firmer this morning and hold within a 109-17 to 109-24 range; currently holding towards the upper end of the day’s range. US-specific newsflow has been lacking this morning, but will likely pick up in the form of US Final PMIs and then the more closely watched ISM Services thereafter. On that front, the headline is expected to pare to 54.0 (prev. 54.5), prices paid at 69.0 (prev. 71.3), and new orders at 57.0 (prev. 57.3).
• Bunds (+8 ticks) and Gilts (+5 ticks) both trade with mild gains, but with action ultimately non-committal. Both benchmarks are off their best levels and trading towards the mid-point of their respective 126.59-126.82 and 88.81-89.12 ranges.
• For Europe specifically, the EZ Sentix Investor Confidence topped expectations (-3.1 vs exp. -14.5), though not all too surprising given the recently signed US-Iran MoU. Sentix stated that “The slump in sentiment caused by the Iran conflict is slowly being overcome. The German government's latest reform efforts are having an impact”. On the data front, EZ PPI Y/Y printed a touch above the expected, as did Retail Sales – no move was seen on the data.
• BoJ announces its outright bond purchase operation in-line with its plan. Offers to buy JPY 100bln of <1yr JGBs. Offers to buy JPY 335bln of 5-10yr JGBs. Offers to buy JPY 100bln of 10-25yr JGBs

Commodities

• WTI Aug and Brent Sep futures are ultimately on a softer footing following choppy APAC and European morning trade. Macro catalysts remain quiet, further compounded by a temporary lull in geopolitical headlines, driving a steady unwinding of the war premium that supported prices throughout H1 2026. WTI resides towards the lower end of a USD 67.82-69.21/bbl range, while Brent sits at the bottom end of a USD 71.02-72.45/bbl parameter.
• Elsewhere, metals are mixed with precious metals softer after last week seeing its first weekly gain since May, supported by fading Fed rate hike expectations following the soft US jobs data, and lower energy prices. Meanwhile, overnight, it was reported that Hong Kong's pension fund will be able to invest in more gold ETFs as part of the government's push to make the city a gold trading hub, SCMP reports, citing sources. SCMP earlier reported that Hong Kong is to reportedly launch a gold clearing and settlement system.
• Price action this morning saw the yellow metal find resistance around the USD 4,200/oz mark, currently residing in a USD 4,144-4,202/oz range, with US traders set to return from their long weekend, and with ISM Services PMI ahead.
• In terms of base metals, copper futures are rising for a third consecutive session in a USD 13,361.53- 13,464.00/t range, whilst aluminium extends a rebound from a four-month low, supported by fading Fed rate hike bets after Fed Chair Warsh last week said price risks were easing.
• Goldman Sachs lowered its LME aluminium price forecast to USD 2,950/t for Q4 2026 and lowered its 2027 average forecast to USD 2,700/t. Goldman Sachs cuts its 2026 aluminium supply deficit forecast to 100k tonnes and raises its 2027 supply surplus forecast to about 1.5mln.
• Infrastructure has reportedly been damaged in the region of Russia's Ust-Luga and Vysotsk oil ports after a drone attack.
• UK ministers are reconsidering a ban on crop-based biofuels for aviation following a lobbying tour of the US Corn Belt by government officials, the FT reported.
• A power outage has been reported at Marathon Petroleum's (MPC) Detroit refinery, causing controlled gas burning, according to local media.
• Hong Kong's pension fund will be able to invest in more gold ETFs as part of the government's push to the city into a gold trading hub, SCMP reported citing sources.
• South Korean prosecutors say refiners colluded to hike prices despite ample oil reserves, Yonhap reported.
• A fleet of 10 Japan-related ships have reportedly left the Strait of Hormuz, shipping data shows.
• Israel's energy minister said Israel is launching a new competitive process to search for more natural gas in the country's economic waters.

Central Banks

• New Zealand NZIER Shadow Board recommends that the RBNZ holds the OCR at 2.25%.
• PBoC injected CNY 7bln via 7-day reverse repos with rate maintained at 1.40%.
• PBoC set USD/CNY mid-point at 6.8066 vs exp. 6.7850 (prev. 6.8047).
• Swiss Total Sight Deposits (w/e Jul 3) 479.2bln (prev. 474.4bln W/W), Domestic 440.9bln (prev. 440.6bln W/W).

Geopolitics: Ukraine

• Ukraine's military said it has struck its oil refineries in Russia's Yaroslavl and Leningrad regions.
• EU's von der Leyen said EU is working to seal the 21st Russian sanctions package in the next days.
• Infrastructure has reportedly been damaged in the region of Russia's Ust-Luga and Vysotsk oil ports after a drone attack.
• Russian Defense Ministry said 519 Ukrainian drones were shot down over the regions overnight.
• A Ukrainian official said the death toll in Kyiv has risen to 9 after the recent Russian attacks.
• US President Trump is to meet with Ukrainian President Zelensky at the NATO summit in Ankara, Turkey.
• Kyiv Mayor said the city is under a Russian missile attack with one residence badly damaged.
• A Russian official said the Ukrainian attack cuts the electricity to Sevastopol in Crimea, AFP reported.
• Several Russian ballistic missiles have struck Kyiv, with explosions being heard, according to an FT reporter.

Geopolitics: Iran

• Islamabad is the more likely option for the next round of US-Iran technical talks, with July 11th expected to be the date, sources tell Pakistani newspaper Dawn, according to Fox. Negotiations are expected to focus on Iran's nuclear programme, frozen Iranian assets, the Strait of Hormuz and the Lebanon ceasefire.
• Israeli Defence Minister Katz said any Iranian leader who tries again to promote plans to destroy Israel will be thwarted; Israel is prepared to defend itself again, with its own forces, at any time and against every threat.
• Iranian Parliament Speaker Ghalibaf said a ceasefire in Gaza will be part of the second phase of the agreement with the US.
• Iranian Parliamentary Speaker Ghalibaf said the US memorandum is 'difficult but possible' to enforce, Al Jazeera reported.
• The Israeli occupation army carries out a bombing operation in the town of Houla in southern Lebanon.
• Israeli Army Chief of Staff Zamir said that the Israeli army will continue its operations to eliminate threats from Lebanese soil.
• Israeli airstrikes hit multiple towns in southern Lebanon.

US Event Calendar

• 9:45 am: United States Jun F S&P Global US Services PMI, est. 51.3, prior 51.3
• 9:45 am: United States Jun F S&P Global US Composite PMI, est. 52.2, prior 52.2
• 10:00 am: United States Jun ISM Services Index, est. 54, prior 54.5
• 11:00 am: United States Fed’s Waller, ECB’s Schnabel, Wunsch, Riksbank’s Seim in Rome

DB's Jim Reid concludes the overnight wrap

I hope your weekend was good. Mine was certainly a big WOW! 8.5 months after back fusion surgery I won both the scratch and handicap 2-day over 50s club championship. I shot 72 and 71 (one over gross). It took Tiger Woods two years after the same fusion surgery to win The Masters so I'm seeing this as a greater achievement. My twins were very impressed with the two huge cups I brought home and have earmarked winning the same event. They qualify in 2068! I wonder if England will have won the football World Cup again by then. I did get up to watch the second half which has just finished as I type this. A crazy win against Mexico. To all the readers in Norway, see you on Saturday!

Moving on, the week after payrolls is usually a quieter affair but there's plenty of global events even if the US calendar is light. In terms of the main highlights, given the current focus on monetary policy the FOMC minutes (Wednesday) and the ECB’s June meeting account (Thursday) will be carefully watched, especially the former given it was the first of the new Warsh regime. Speeches from Fed Governors Waller (Monday), Williams and Logan (Thursday) will provide a more "live" update to the committees' thinking. Elsewhere, China inflation data (Thursday) and a run of German activity indicators including factory orders (today), industrial production (tomorrow) and trade (Thursday) are worth tracking. German reforms in recent weeks have offered some renewed optimism that we will finally see the benefits of the huge fiscal spending and reform agenda after scepticism had been building. Geopolitically, the NATO summit (Tuesday–Wednesday) will also be in focus, with Mr Trump in attendance, and could generate plenty of headlines.

In terms of other data and events, today sees ISM services (Monday) which follows the recent weakness in manufacturing, where our economists expect a modest improvement. Most of the other data in the US is second tier but includes existing home sales on Thursday. Outside of the US, the BoE’s financial stability report (tomorrow) will be interesting, while inflation prints from Sweden (Wednesday) and Denmark and Norway (Friday) deserve a glance. In Japan, the data flow includes labour cash earnings and household spending (tomorrow), the Economy Watchers survey (Wednesday) and PPI (Friday). Elsewhere, we will see the RBNZ policy decision (Wednesday), where our economists expect a rate hike, and Canada’s labour market report (Friday).

In Asia, it's all eyes on the KOSPI at the moment after a pretty wild time of late. After being up 3% early in the session, it's now -1.86% as I type with the Nikkei -1.18% lower. The Shanghai Comp is -0.35% with the ASX -0.22%. However, the Hang Seng is +1.16%. S&P (+0.23%) and Nasdaq (+0.76%) futures are up but are roughly around Friday's levels when the US was on holiday.

Recapping last week now and markets saw a decent risk-on move, with the S&P 500 posting its best weekly performance since early May, with a +1.76% advance. That came amidst several dovish headlines, which meant investors priced out the chance of an imminent rate cut. For instance, Fed Chair Warsh said that inflation risks had come down at the Sintra Forum on Wednesday. And then on Thursday, the US jobs report showed payrolls up +57k, which was weaker than expected (even if unemployment was a tenth lower than expected). So collectively, that meant market pricing for a July hike fell from a 30% chance to 22% over the course of the week. And that dovish repricing was clear further out the curve, as the amount of hikes priced by the December meeting also came down slightly from 32bps to 30bps.   

Over in Europe there was a similar trend, with the STOXX 600 up +2.66% (+0.68% Friday) to a new record. That came as markets grew more doubtful about another ECB rate hike this year, with the latest flash CPI print also surprising on the downside. It showed headline inflation falling more than expected to +2.8% in June, and core CPI also falling to +2.4%. So markets also priced out the chance of another ECB rate hike by December, which fell from a 96% to an 83% chance over the week.  

But even though equities did quite well on the whole, there were still clear pockets of weakness, most notably in the chip sector. Indeed, the Philly semiconductor index fell -4.37%, losing ground for a second week running. Interestingly as well, the dovish repricing failed to prevent a move up in longer-dated yields, with the 10yr Treasury yield up +11.5bps last week to 4.48%, whilst the 10yr German yield rose +8.4bps to 2.93%.  

Finally, oil prices were comparatively steady last week, and Brent crude saw little movement with a +0.18% gain (+0.45% Friday), leaving it at $72.12/bbl. Otherwise, credit spreads tightened across the board, with US IG (-1bps) and HY (-15bps) spreads both coming down. It was a similar story in Europe too, where Euro IG (-1bps) and HY (-2bps) spreads also tightened.