Markets
Today, volatility in tech related equities (and other assets) probably was at least as much of a focal point on global markets than was the case for the developments regarding the conflict in the Middle East. With respect to the conflict in Iran, US president Trump at least didn’t bring much concrete news on the next steps in the process of reaching a deal with Iran. Brent oil this morning briefly dropped below $85 p/b, but currently again trades near $86.5 p/b. According to sources OPEC+ pauses its gradual output hikes after still a final increase in September. Of course, the impact of such a decision remains some kind of symbolic and any impact on prices is difficult to assess as long as disruptions in the export from in the Persian Gulf/Middle East region continue. The TTF European gas reference contract also didn’t decline any further (€57.7 p/MWh). In this set-up there was also no big reason for yields to ease aggressively further. Markets consider current pause in the Iran conflict as to little to already profoundly change their assessment of CB policy going forward. At current levels for energy prices, some kind of high(er) for longer scenario for both the ECB and the Fed can’t be ruled or even scaled back yet. US yields are easing between 2.3 bps (30-y) and 3.5 bps (2-y). Just call it wait-and-see trading ahead of tomorrow’s Fed policy decision. Declines in German yields are even slightly less (2-y -1.8 bp, 30-y unchanged). In the meantime, all kinds of questions on sustainability of different aspects of the AI rally has become an additional factor of uncertainty and volatility on equity markets. At least for now, this kind of ‘risk-off’ apparently doesn’t really help any kind of safe haven bid for core bond markets. One can even raise the question whether recent rise in real yields (as a risk premium) doesn’t add to pressure at least on some assets in the tech sector. The Eurostoxx 50 initially trade about 0.5% higher, but couldn’t hold to that gain (currently -0.2%). US indices also suggest some further sector rotation with the Dow rising 0.6%, but the Nasdaq again cedes 1.3%.
No clear trend in the major FX cross rates today. The dollar holds yesterday’s gain, but with hardly any follow-through price action (EUR/USD 1.1370, DXY 105.5). USD/JPY again came very close to its multi-decade top (low for the yen) just below the 164 big figure. Markets in this respect keep an eye at tomorrow’s Fed policy decision and the BOJ policy meeting on Friday. In the context of a ‘hawkish’ Fed holding to its commitment to deliver price stability, it will not be easy for the BOJ to balance its anti-inflation strategy against the government’s growth agenda. In this respect, a rumored sales tax cut potentially to be announced in the near future, probably won’t help fiscal credibility, and the yen. EUR/GBP today also showed no clear trend hovering near 0.855.
News & Views
According to the INSEE Monthly consumer survey, household confidence in France continued to recover in July. At 86, the indicator that summarizes the survey increased by 2 points, but remains below its long-term average (100). Even so, the survey showed rather broad-based improvements across sub-indices. In July, households’ opinion regarding their personal financial situation, past (-26 from -28) and future (-14 from -16) has improved again and moved closer to their long-term averages. The proportion of households believing it is a good time to make major purchases has also increased (-36 from -38), but also remains below its long-term average. Households’ opinion on future standard of living in France even has risen sharply again (-59 from -65), but still holds well below average. Households’ fears about unemployment have fallen back sharply. Aside from the positive assessment on aspects of their personal situation, consumers’ assessment on inflation also improved substantially. The proportion of households who consider that prices will accelerate over the next twelve months has fallen sharply (-33 from -15), the associated balance of opinion has declined by 8 points, after falling by 14 in June. It returns to nearly the same level as in February, before the beginning of the war in the Middle East, as well as to its long-term average.
 probably was at least as much of a focal point on global markets than was the case for the developments regarding the conflict in the Middle East. With respect to the conflict in Iran, US president Trump at least didn't bring much concrete news on the next steps in the process of reaching a deal with Iran. Brent oil this morning briefly dropped below $85 p/b, but currently again trades near $86.5 p/b.){kind=link}