Report by Renta 4
European markets opened higher (Eurostoxx 50 futures up 1%) following a session on Wall Street that started slowly but ended strongly, leading to a recovery of 1%–1.5% in the main US indices, as well as gains in futures (S&P 500 and Nasdaq 100 up 0.2%–0.3%).
All this despite the escalating tensions between the US and Iran, which have pushed Brent crude up by 9% over the past week to USD 79 per barrel. Following three Iranian attacks on ships in the Strait on Tuesday, the US responded by striking Iranian targets and revoked the exemption for Iranian oil exports. Yesterday, Trump declared the ceasefire “over” and launched a second round of strikes against Iranian targets. The result was a nearly paralysed Strait of Hormuz, with only 14 merchant vessels passing through yesterday – the lowest figure since the MoU and compared with a daily average of 34 over the previous three weeks (peaking at 59 on 24 June). Tensions between Trump and European leaders were also evident at the NATO meeting, with the US president stating that his decisions regarding US troops in Europe would depend on Greenland and Iran, using the security of the allies as a bargaining chip, whilst once again threatening Spain with a cut in bilateral trade.
This context of heightened geopolitical risk and upward pressure on energy prices is once again pushing up expectations of interest rate rises and yields (over the week, 10/15 bp in the US and Germany, with the T-bond at 4.6% and the Bund at 3.1%).
The market is once again pricing in two rate rises of 25 bp each for both the Fed and the ECB through to Q1 2027. Meanwhile, the Fed’s minutes (from the 17 June meeting) confirm that some members wanted to raise rates as early as June, although they ultimately supported the unanimous decision to pause. Future movements will depend on whether inflation remains high due to strong AI demand, high energy prices and tariffs, with the next key data point being 14 July (June CPI), the same day that Warsh is due to appear before the Financial Services Committee for his first testimony to the House of Representatives.
At company level, we note that the IPO of South Korea’s SK Hynix on the Nasdaq is more than seven times oversubscribed, with proceeds expected to total approximately $24.5 billion, making it the second-largest debut by a foreign company on US stock exchanges (the first was Alibaba in 2014). SK Hynix shares will begin trading on Friday.
On the macro front, China’s June inflation figures (PPI 4.1% against 3.9% previously, CPI 1% against 1.2% previously, core CPI 1% against 1.1% previously) suggest that the worst of the energy shock may be over (barring any further developments in the Middle East).
If so, this could pave the way for some rate cuts later this year to boost the Asian giant’s economy.
Yesterday the IMF published its July economic forecasts, revising global GDP down by 0.1 pp for 2026, whilst raising it for 2027 by 0.2 pp (compared with April estimates). The largest revisions for 2026 have been in the Eurozone (-0.2 pp compared with April to +0.9 per cent, unchanged for 2027 at +1.2 per cent), led by France (-0.3 pp for 2026e to +0.6 per cent, unchanged for 2027e at +0.9 per cent) and Germany (-0.1 pp for 2026e and -0.2 pp for 2027e to +0.7% and +1% respectively), and with a surprise from the United Kingdom, where expected growth has improved by +0.2 pp for 2026 estimated to +1% (unchanged for 2027 at +1.3%). Among emerging economies, Brazil stands out, with forecasts for 2026 and 2027 revised upwards by +0.5 pp and +0.2 pp, in contrast to Mexico, which has seen a significant downward revision of -0.4 pp for 2026e and -0.3 pp for 2027e.
In its report, the IMF highlights that the global economy, on the whole, has weathered the shock of the war better than had been feared so far, with movements and repercussions across the main transmission channels (commodity prices, inflation expectations and financial conditions) remaining relatively limited. However, the transmission is still in its early stages, with leading indicators pointing to weaker momentum ahead. With financial conditions having eased since their peak in early April, the report notes that the risks to the outlook are more balanced than in April, but still tilted to the downside.
As regards prices, the disinflationary trend that had been underway since early 2024 has stalled, and headline inflation is expected to rise from 4.1 per cent in 2025 to 4.7 per cent in 2026, before falling to 3.9 per cent in 2027. The forecast for 2026 has been revised upwards by 0.3 percentage points compared with April 2026, mainly as a result of higher energy and food prices.
