2026 Weekly Update

Market update

The S&P 500 closed the week at 7’457.69, -1.55% lower. The Dow Jones closed at 52’146.42, -0.93%, with the Nasdaq lower by -2.90%. The volatility index VIX closed the week at 18.77, up from 15.03. The Euro Stoxx 600 rose +0.07%. 

The 10-year UST closed at 4.55%, down from 4.56% a week before. The yield curve is upward sloping with the yield spread between the 3-month and 10-year UST at 75bps. US Corporate Bond spreads: Investment Grade spreads widened 2bps at 80bps and High Yield spreads widened 4bps at 313bps. German 10-year Bunds yield closed at +3.12% up from +3.06% a week before. In Europe, Corporate Investment Grade spreads stayed flat at 88bps and High Yield narrowed -3bps at 302bps. 

The US Dollar Index (DXY) depreciated -0.19% last week and closed at 100.77. The Euro closed at 1.1439 (+0.20%); the Yen depreciated -0.45%, closing at 162.4 and the Swiss Franc appreciated +0.16%, closing at 0.8073. Gold closed at $4'017.39, depreciating -2.49%. Oil was higher, Brent closed at $88.1 (+15.91%) and WTI at $82.49 (+15.52%).

Macroeconomy

US CPI

US CPI (Consumer Price Index) fell by -0.4% in June (vs. -0.1% expected). In fact, it was the biggest monthly price drop since the pandemic lockdowns of April 2020, and it pushed the y-o-y reading all the way down to +3.5%, having been at +4.2% in May. The main driver was a big slump in gasoline prices, which plummeted by -9.7% in the month. But even core CPI was surprising on the downside too, with a -0.02% monthly price drop (vs. +0.2% expected) amid a decline in core goods prices and subdued rent inflation. So, that marked the first decline for core CPI since May 2020, and it pushed the y-o-y reading for core CPI down to +2.6%.

US PPI

US headline PPI (Producer Price Index) was down -0.3% in June (vs. an expected unchanged figure), but we also had a big downward revision to the May reading, which fell half a point to +0.6%. So, the recent inflation picture was softer than originally thought, with the y-o-y PPI reading down to +5.5% (vs. +6.2% expected). And significantly for investors, there wasn’t any obvious alarm either from the components that feed into PCE inflation (the Fed’s target measure).

US data

Atlanta Fed’s GDPNow estimate for Q2 moves up, now showing an annualized rate of +1.7% (vs. +1.3% before). Weekly initial jobless claims were down to 208k in the week ending July 11 (vs. 217k expected), which was their lowest in two months. Retail sales grew by +0.2% in June as expected, and there was an upward revision of a tenth to the May figures.               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.

Fedspeak

Fed Chair Kevin Warsh appeared before the Senate Banking Committee. He continued to strike a tough note on inflation and refrained from any direct policy guidance, while noting that the softer CPI print did not mean “mission accomplished”. He also said that “members of our Committee have no tolerance for persistently elevated inflation” and argued that if the Fed “get policy right—and we will—the inflation surge of the last five years will be a thing of the past.” In all, the new Chair looked to cement inflation-fighting credibility. We also heard from Governor Waller, who kept the door open to an imminent hike, saying that “If we get another hot reading on core inflation this week, then the FOMC will need to consider tightening monetary policy in the near term”. Fed Governor Cook maintained a hawkish-leaning tone, saying that the FOMC can take its time to observe more data but that “If we do not see signs of disinflation soon, I am prepared to act”. Finally, Dallas Fed President Logan (voter) said that “modestly higher interest rates would better balance the outlook and risks” as the path towards a disinflation scenario was for now “more a hope than a likelihood”.

ECB preview

Markets expect the ECB to hold rates unchanged at its upcoming Wednesday meeting on July 23. Incoming data since the June meeting have been broadly consistent with baseline staff projections. However, the renewed Middle East conflict has pushed energy prices higher again, which limits the ECB’s room to sound complacent and keeps upward pressure on the inflation outlook. The likely message is therefore one of patience rather than reassurance: no move in July, but no signal that the tightening risk has disappeared. The expected communication from President Lagarde is still likely to be hawkish in tone. The Governing Council is expected to preserve a meeting-by-meeting approach and to keep options open rather than provide firm forward guidance, reflecting ongoing uncertainty.

China data

China Q2 GDP expanded by 4.3% y-o-y, falling short of 4.5% expectations and slowing notably from the previous quarter (5%). As a result, first-half growth came in at 4.7%. On a q-o-q basis, GDP rose 0.9%, marking the slowest pace of expansion in more than two years. Additional June data presented a mixed picture of momentum. Industrial production increased 5.3% y-o-y, surpassing expectations of 4.6% and accelerating from 4.5% in May, highlighting continued strength in the industrial sector. In contrast, fixed-asset investment fell -5.7% in the first half of the year from a year earlier, a steeper decline than expected and a deterioration from the -4.1% drop recorded over the January–May period. Retail sales rose 1.0% y-o-y in June, outperforming expectations for a slight contraction, although consumer spending remained relatively subdued. Meanwhile, China’s property market continued to weaken, with new home prices declining -0.15% m-o-m in June. While this represented a modest improvement from May’s -0.20% decline, persistent softness in housing demand across most regions continued to outweigh isolated signs of stabilization in major cities. In other data, both exports and imports grew significantly faster than expected in June. Strong global demand for AI-related products and technology goods helped offset increasing geopolitical pressures. Exports rose 27.0% y-o-y, surpassing expectations of 19.0% and accelerating from May’s 19.4% growth. Imports increased 36.0%, well above the forecast of 26.1% and stronger than the previous month’s 27.4% rise. As a result, China’s trade surplus widened to $125.62 bn in June from $105.43 bn in May, exceeding market expectations of $120.10 bn.

Central banks

The Bank of Korea delivered their first rate hike since 2023, with a 25bps hike that took the policy rate to 2.75%. The move was in line with consensus, and their statement said that “inflation is expected to remain above the target level for a considerable time”, and they said that growth this year “is expected to considerably exceed the May forecast of 2.6%”. Meanwhile, they also signaled further hikes ahead, saying that “it is judged that it will be necessary to continue a policy stance consistent with further rate hikes”. In Canada, the Bank of Canada kept rates unchanged at 2.25% as the consensus expected. There was some optimism however, as their statement said that the economy was “showing signs of improvement”.

Highlights

Oil update

Oil markets remain under pressure following the effective closure of the Strait of Hormuz, with transit falling to near zero on the latest reading. While global demand and supply had begun to normalize, demand rising 1.6mbd in June and supply rebounding 4mbd, both remain well below pre-crisis levels, and OECD inventories have drawn down roughly 235 million barrels since February, leaving buffers small. The stress is now in refined products rather than crude itself: gasoline inventories are low, and product markets are being tightened by the combination of the Strait disruption, seasonal demand, and strikes on Russian refining assets. The base case remains that Iran is unlikely to pursue a prolonged blockade, as overuse of the Strait as a strategic lever would accelerate Gulf producers' investment in alternative export routes, with new pipeline capacity potentially operational within two to three years. That said, the current level of inventories indicates that the system’s ability to absorb further supply shocks is limited, which increases the sensitivity of the market to ongoing disruptions.

Earnings

Q2 2026 earnings season is seeing a strong start, with 10% of S&P 500 companies having reported and 88% have beaten EPS estimates, well above the 5-year average of 78% The magnitude of beats is also impressive, at 16.4% above consensus, more than double the historical average of 7%. Financials have led the way, with JPMorgan, Goldman Sachs and Morgan Stanley all posting important revenue beats driven by strong investment banking, notably thanks to IPO activity. Tech has been a more mixed picture: ASML beat and raised its full-year outlook but saw limited stock reaction, while TSMC reported record earnings yet sold off on concerns over surging capital expenditure. The week ahead is dense: Tuesday brings Novartis and General Motors; Wednesday is the busiest day with Alphabet, Tesla and IBM in the US alongside Banco Santander and Deutsche Boerse in Europe; Thursday has Intel, SAP, Roche, Nestlé, BNP Paribas and Lockheed Martin; and the week closes Friday with American Express, Verizon and NextEra Energy.

On rates

US Treasuries rallied last week as softer-than-expected CPI data eased inflation concerns, pushing the probability of a July Fed hike from 34% to 14% and driving the 2-year yield down 2.9bps to 4.18% and the 10-year down 1.3bps to 4.55%. The print reinforces the Fed's emerging case of rates on hold, with further tightening only back on the table if disinflation stalls. In Europe, the picture was inverted: rebounding energy prices rose inflation fears, pushing the 1-year Euro inflation swap up 46.9bps to 2.50% and the 10-year Bund yield up 6.0bps to 3.12%, reflects again the continent's vulnerability to energy shocks and suggesting the ECB may face a harder path to cutting than markets had previously anticipated. In Asia, the 10-year JGB yield eased to 2.70% from 2.78% after Tokyo confirmed it would guarantee BoJ independence in its economic plan, alleviating concerns about a political interference in monetary policy. 

What to watch

• Monday: Canada CPI; UK House Prices; China Loan Prime Rates
• Tuesday: US ADP Employment; UK Labor Market; German ZEW Survey; New Zealand CPI; South Korea Exports; Taiwan Exports
• Wednesday: UK CPI; Japan Exports; Indonesia Rate Decision
• Thursday: US Initial Jobless Claims; ECB Rate Decision; South Korea Q2 GDP; Australia Employment
• Friday: US Flash PMIs; UK and Eurozone Manufacturing and Services Flash PMIs; Japan June CPI