2026 Weekly Update

Market update

The S&P 500 closed the week at 7’575.39, +1.23% higher. The Dow Jones closed at 52’637.01, -0.50%, with the Nasdaq higher by +1.74%. The volatility index VIX closed the week at 15.03, down from 15.81. The Euro Stoxx 600 fell -1.79%.

The 10-year UST closed at 4.56%, up from 4.48% a week before. The yield curve is upward sloping with the yield spread between the 3-month and 10-year UST at 77bps. US Corporate Bond spreads: Investment Grade spreads stayed flat at 78bps and High Yield spreads narrowed -4bps at 309bps. German 10-year Bunds yield closed at +3.06% up from +2.93% a week before. In Europe, Corporate Investment Grade spreads narrowed -2bps at 88bps and High Yield narrowed -13bps at 305bps. 

The US Dollar Index (DXY) appreciated +0.09% last week and closed at 100.95. The Euro closed at 1.1416 (-0.18%); the Yen depreciated -0.21%, closing at 161.68 and the Swiss Franc depreciated -0.66%, closing at 0.8086. Gold closed at $4’119.93, depreciating -1.36%. Oil was higher, Brent closed at $76.01 (+5.39%) and WTI at $71.41 (+3.96%).

Macroeconomy

The Fed

The Fed announced the leadership teams of the five task forces that Chair Warsh announced to examine their current approach and processes. The areas that the Fed is examining are the communications strategy, the use of the balance sheet, the quality and reliance on existing data sources, productivity and jobs, and inflation framework. The teams are mix of former policy makers, academics, and corporate leaders. In terms of Fedspeakers, Fed Governor Waller argued that the risks facing policymakers have “completely flipped around” over the last year. Previously, those concerns were focused on labor market weakness, but he said that employment conditions now appear to be stabilizing whilst inflation has been “taking off”. As such, Waller made clear that the Fed's commitment to its 2% inflation target was unwavering, describing it as both credible and non-negotiable. Also, Waller stressed that the Fed would not keep rates artificially low to help finance growing US fiscal deficits, a timely comment given ongoing concerns around the US debt trajectory and the prospect of persistent budget shortfalls. Waller's comments also fed into the increasingly lively debate on central bank communication. He said he’d personally prefer an inflation target range rather than a precise point target, but he acknowledged that adjusting the framework now would risk undermining credibility. And on forward guidance, he argued that if the Fed's reaction function is clearly understood, policymakers shouldn’t need to say very much about the future policy path. Interestingly, he interpreted recent comments from Fed Chair Kevin Warsh at Sintra about the demise of forward guidance as a reaffirmation of the primacy of the 2% inflation target rather than a shift in regime.

US inflation

This week, June CPI and PPI data are expected to be published. Investors expect monthly CPI at -0.1% (vs. +0.5% in May), with core at +0.2% (vs. +0.2% previously). On a y-o-y basis, headline inflation is projected to fall from 4.2% to 3.8%, while core eases only marginally by 2bps to 2.83%. On the Core PPI side, analysts expect a +0.3% increase (vs. +0.4% last month) however, an increase in the y-o-y rate to 5.2% (vs. +4.9% in May). Headline US inflation appears to have passed its near-term peak, with the recent decline in gasoline and fuel prices likely to produce two months of flat to negative headline CPI prints. Inflation is still expected to remain above 3%, so it is still far from target, but if energy-market conditions do not worsen materially, the pass-through from energy to US inflation should now be past its peak. The implication is not that the inflation problem is solved, but that the near-term direction of headline CPI should become somewhat more favorable. A key medium-term inflation issue remains the impact of AI-related demand, which several Fed participants increasingly see as inflationary through technology products and electricity demand. Even more dovish officials are now paying attention to this channel, suggesting it is unlikely to be dismissed if it proves persistent. At the same time, planned methodological revisions to several PCE categories, notably computer software, portfolio management and legal services, could lower core PCE by around 20-30bps, bringing the y-o-y rate closer to 2.9-3.0% from roughly 3.2% (Q4/Q4). That revision would not transform the inflation picture, but it would weaken the case for urgent near-term tightening.

FOMC minutes

The minutes from last month’s FOMC meeting, which was the first with new Chair Kevin Warsh, added further credence to the hawkish market pricing seen since the meeting last month. While much of the committee agreed that inflation would cool as energy prices fell and one-off tariff impacts subsided, there were some worries of persistent underlying price pressures. Artificial Intelligence and the corresponding build out seemed top of mind for the committee, as “many participants noted that ongoing strong demand for AI infrastructure would likely sustain upward pressure on prices for technology products and electricity”. There is also greater concern amongst the committee that consumers and businesses are increasingly expecting higher prices. However, most Fed officials said in the minutes that they put more weight on financial market measures of inflation expectations rather than surveyed responses.

US data

US weekly initial jobless claims came in at 215k in the week ending July 4 (vs. 217k expected). That took the 4-week moving average down to 218.75k, and so far at least, claims remain well beneath their summer peaks in 2023, 2024 and 2025. However, existing home sales unexpectedly fell in June, falling back to an annualized rate of 4.09m (vs. 4.20m expected). Also, the US ISM services index for June was exactly in line with consensus at 54.0. The prices paid reading was also broadly as expected at 67.7 (vs. 67.5 expected). There was some relief after the employment component (51.2) was back in expansionary territory for the first time since February.

European Central Bank

The minutes of last month’s ECB meeting, where they hiked rates for the first time since 2023, highlighted the inflation pressures, and said how “Further indirect effects were in the pipeline, pointing to more broadening of inflationary pressures across the economy”. Moreover, there was an acknowledgment that “memories of the 2022 high-inflation episode could make households and firms react more quickly than in the past, increasing the risk that price-setting and wage-bargaining behavior would adjust.” Interestingly, there was also a discussion about what happened in 2011, when the ECB hiked rates before reversing course shortly after as the sovereign debt crisis became more severe. But the view was there were key differences with that period, including the lack of financial stress.

Japan

Japanese Finance Minister Satsuki Katayama indicated that the government intends to encourage pension funds, including the Government Pension Investment Fund (GPIF), to increase allocations to domestic financial assets. Under its current medium-term management plan, GPIF allocates ‌25% ⁠each to domestic bonds, foreign bonds, domestic equities and foreign equities. For domestic bonds, it allows a six-percentage point deviation range around its target allocation. The GPIF manages a massive ¥294 trillion ($1.8 trillion) portfolio, holding nearly $931 billion in foreign assets, including U.S. Treasuries.

China data

Chinese June inflation data revealed a diverging trend, highlighting uneven price pressures in the economy. CPI eased more than expected, rising +1.0% y-o-y (vs. +1.1% consensus) and slowing from May's +1.2% reading. In contrast, factory-gate inflation (PPI) accelerated to a four-year high of +4.1% y-o-y, matching forecasts. On a m-o-m basis, however, producer prices fell -0.3%, the first such decline since July 2025.

RBNZ

The Reserve Bank of New Zealand (RBNZ) has implemented its first key interest rate hike in three years, raising the official cash rate to 2.50% from 2.25%. This move, which was expected, signals the central bank's intention to transition to a less stimulatory monetary setting in an effort to curb inflationary pressures. The decision follows a split vote at the bank's previous meeting in May, where Governor Anna Breman had used her casting vote to maintain the cash rate. Following the decision, the New Zealand dollar strengthened by +0.42% to just above 57 cents against the US dollar, with the yield on the policy-sensitive two-year notes increasing by +4.5bps, now trading at 3.37%, amidst reinforced expectations for additional rate hikes this year.

Highlights

Oil update

Oil prices remain volatile, driven by the renewed US–Iran tensions and ongoing uncertainty around negotiations in the Gulf. Transit through the Strait of Hormuz is disrupted, with crude flows now below 40% of the January–February average. Despite this, the market remains broadly balanced, as US exports remain significant and Chinese demand has not materially strengthened, keeping crude prices in the USD 70–78/bbl range. Beyond crude, refined products are under greater pressure: Russia has extended its diesel export ban until 31 July, tightening an already constrained European market where refineries are running near capacity. US gasoline inventories are also at their lowest level for this time of year since 2021, raising the risk that end-user fuel prices rise even if crude remains contained. Supply–demand projections continue to point to a deficit in the coming months, suggesting that refining tightness could keep energy-related inflation pressures elevated.

Earnings

Q2 US earnings season starts this week, with the major US banks reporting already Tuesday. Q1 set a strong benchmark with roughly three-quarters of S&P 500 companies beating earnings expectations by more than 2%, one of the broadest beats in over 15 years. Headline earnings growth came in at 27%, though underlying growth was closer to 17% once mark-to-market gains on stakes in Anthropic and OpenAI are excluded. For Q2, consensus expects earnings growth above 20% y-o-y. The setup is more demanding, however, as analysts have already revised estimates higher ahead of results, the strongest pre-season upgrade cycle since 2021, while the US dollar has turned less supportive for international earners. This week's calendar is dense: tomorrow, JPMorgan, Bank of America, Goldman Sachs, Wells Fargo and Citigroup report. Wednesday adds Morgan Stanley, BlackRock, Johnson & Johnson and ASML, while Thursday brings TSMC, Netflix, General Electric and UnitedHealth. ASML and TSMC will be closely watched for early signals on global tech. The week closes with European industrials Volvo, Sandvik and Saab on Friday.

On rates

Sovereign bond yields rose across major markets last week, driven primarily by an oil price spike that weighed particularly on European assets given the continent's energy exposure. 10-year Bund yields climbed 13bps to 3.06%, while markets also repriced ECB tightening expectations higher, with an additional 34bps of hikes now priced by December. On the Fed side, recent communications have reinforced a scenario-based approach rather than a firm directional signal: the minutes indicate that most participants see rates staying on hold or moving lower if inflation returns toward 2%, while further firming remains possible if progress stalls. Markets are currently pricing a ~20–30% probability of a July hike, though this could fade following the upcoming CPI release, which remains the key near-term catalyst. In Asia, the 10-year Japanese government bond yield briefly touched its highest level since 1996 before retreating after Finance Minister Katayama called on domestic pension funds to increase allocations to local financial assets, ending the week little changed at around 2.78%. Looking ahead, the inflation trajectory, particularly in the US, will be decisive: a benign CPI print could close the door on July Fed action, while a upside surprise would renew pressure.

What to watch

• Monday: US June federal budget balance, Fed's Bowman and Waller speak; Germany May current account balance; ECB's Schnabel speaks; BoE's Pill speaks
• Tuesday:US June CPI, Fed Chair Warsh testimony; China June trade balance; Germany June wholesale price index; BoE's Bailey speaks; earnings of JPMorgan Chase, Bank of America, Goldman Sachs, Wells Fargo, Citigroup
• Wednesday: US July Empire manufacturing index, June PPI; China Q2 GDP, June retail sales, industrial production; Eurozone May industrial production; Bank of Canada decision; ECB's Nagel and Panetta speak; earnings of ASML, Johnson & Johnson, Morgan Stanley, BlackRock
• Thursday: US June retail sales, initial jobless claims; UK May monthly GDP; Eurozone May trade balance; Bank of Korea decision; earnings of TSMC, UnitedHealth, General Electric, Netflix
• Friday: US June industrial production, import price index, housing starts, July University of Michigan survey; ECB May current account; earnings of Volvo, Sandvik, Saab