Report by Renta 4
European markets opened without any major movements (Eurostoxx futures up 0.1 per cent, S&P up 0.2 per cent, Nasdaq up 0.5 per cent), as did Asian markets (Japan up 1 per cent, South Korea down 1 per cent), as markets digested both Kevin Warsh’s message (which the market ultimately interpreted negatively despite an initial positive reaction) and the mixed results from Microsoft and Meta. All this against a backdrop of ongoing tensions in the Middle East and focus on the technology sector, which continues to decline (Nasdaq down 11% and the Philadelphia Semiconductor Index down 29% from June’s highs).
On the geopolitical front, yesterday, Brent rose by 8% and this morning by 1% to $9 per barrel following Trump’s statements that he will strike Iran hard in the wake of the attack on US bases in Jordan, which further diminishes the likelihood of diplomatic talks resuming and takes us back to a scenario of military escalation.
As for the Fed, in line with expectations, it kept rates in the 3.50%–3.75% range for the fifth consecutive meeting, with nine votes in favour of maintaining rates and three in favour of a 25-basis-point rise: the already anticipated Logan (Dallas) and Hammack (Cleveland), whose previous statements had highlighted their concern about inflation, were unexpectedly joined by Kashkari, one of the historically most ‘dovish’ members – a clear sign that ‘hawkish’ pressure is growing within the Fed. There were no changes to the statement, which reiterated that inflation remains elevated relative to the 2 per cent target (attention today on the core private consumption deflator, most recently at 3.4 per cent) and the solid labour market, as well as the resilient economy (supported by high investment).
The market is maintaining its forecasts of a raise of 25 bp in September/October and a further 25 bp in Q1 2027. The next meeting (16 September) will incorporate the updated macroeconomic outlook (GDP, inflation) and the ‘dot plot’ (which, excluding Warsh’s ‘dots’, pointed in June to one rate rise this year). By September we will have a couple more inflation figures (and not just the one positive figure from June, which reflected the fall in oil prices from their highs following the signing of the US-Iran MoU), figures that will factor in the recent tensions in the Middle East (the threat of a double bottleneck: the Strait of Hormuz and the Red Sea). Until then, the most significant event will be the meeting of central bankers in Jackson Hole (27–29 August), which will be followed with interest by investors, and where Warsh could provide the market with anupdate on the five working groups set up to reform the Fed and define a “new set of rules”.
As for the results from the hyperscalers announced yesterday after the US market close, which showed a mixed picture, where evidence of monetisation of high capital expenditure makes all the difference:
1) Microsoft (share price up 9% after demonstrating actual monetisation, with Azure up 43% versus an estimated 40% and guidance of 45% for the current quarter, and with a reduction in capex guidance from $190 billion to $175 billion, although this was due to an accounting adjustment resulting from the extension of the useful life of assets from 25 to 40 years, whilst only 7% of EPS is attributable to the revaluation of its stake in Anthropic);
2) Meta (share price down 7% after disappointing with Q3 revenue guidance slightly below consensus, but above all due to the fall in free cash flow to $784 million, the lowest level since Q3 2022, as a direct consequence of massive spending on AI capital expenditure, which has also led the company to raise the lower end of its full-year capex guidance slightly, by 2 per cent, to $130,000–145,000 million).
Samsung has also reported, with record results but a fall in its share price (down 2%), clear evidence that expectations are high. The South Korean firm forecasts that the gap between memory supply and demand will widen in 2027 and states that customers are seeking multi-year contracts at high prices.
As for the sharp falls recorded by the Kospi (40% over the last month), South Korea has announced a package of market stabilisation measures following an emergency meeting, which will include restrictions on retail participation in leveraged ETFs, setting an exposure limit as a percentage of the investor’s total portfolio and increasing trading costs. These measures come on top of the restrictions already scheduled for 31 July, such as the higher minimum cash deposit requirement for investors in leveraged ETFs tracking individual shares. It is thus clear that leveraged ETFs tracking individual securities in a highly concentrated market (Samsung and SK Hynix accounted for as much as 60% of the Kospi at the end of June) with high retail participation are inherently unstable and require preventive, rather than reactive, safeguards. ETFs tracking Samsung and SK Hynix have recorded losses of as much as 75-80%.
On the corporate front, Amazon and Apple will publish their Q2 26 results today in the United States, although we will also see a huge array of results both in Europe (Schneider, Sanofi, Adidas, BMW and Universal Music) and in Spain (Cellnex Telecom, DIA, Fluidra, Cirsa Enterprise, Faes Farma, Técnicas Reunidas, CAF, ArcelorMittal, InSur, BBVA, Prosegur Cash, Meliá Hotels and Puig).
As for central banks, the day will be dominated by the meeting of the Bank of England, where we do not expect any changes to policy rates, which are set to remain at 3.75%, with a vote likely to mirror that of June (7 in favour of holding vs 2 in favour of a hike) against the backdrop of a fragile labour market that is limiting wage pressures. The market is pricing in a +25 bp hike in Q4 2026, another in Q1 2027, and is beginning to price in a third in Q2 2027. We will be keeping a close eye on the update to the macroeconomic outlook, with inflation likely to hover around 3% in 2H26, still below the level (4%) that the BoE considers could trigger second-round effects, although the volatility inherent in the current geopolitical context (continuous de-escalations and escalations in the Middle East) could detract somewhat from the credibility of the forecasts.
