Markets
American investors are back After enjoying a long Independence Day weekend. However, it hardly fetched New momentum for trading dynamics. In the absence of significant data from the European Monetary Union, EU (and UK) bond yields maintained very narrow ranges, changing by less than 1.5 basis points across the curve. US bonds are still seeing slight gains after US payrolls released on Thursday were weaker than expected. With Brent crude currently holding in the $71-72 per barrel area, some improvement in inflation may be ruled out. The topic of financial sustainability It continues to stay. Long-term Japanese government bond yields again touched multi-year peak levels in 10 years and 20 years (4.1 basis points and 3.8 basis points, respectively). After an unconvincing 10-year auction last week, Next comes the reality check As soon as tomorrow, with the JGB 30 year auction. Movements in intra-EMU government bond spreads (versus swaps) continue to evolve orderly. However, spreads versus 10-year swaps for the likes of Italy (72 basis points), France (73 basis points), Belgium (51 basis points), or Spain (43 basis points) are still far from levels before the US-Iran conflict began. In other markets, several technology and AI-related indices were trading choppy again this morning (eg. KOSPI), but some calm has returned. Eurostock 50 It touched an all-time record, but is currently down 0.4%. US stocks are also once again trying to overcome technology/AI skepticism. The Nasdaq rose 0.85% at the open, but last week’s price action shows that intraday trends can change quickly.
In foreign exchange markets, The dollar rose modestly despite the limited loss of interest rate support. DXY regains the 101 mark. EUR/USD fell from 1.144 to 1.142. At present, it is not yet clear whether (and to what extent) fiscal sustainability may impact the likes of the euro, dollar and/or sterling. The Burnham government’s fiscal intentions still need to be fleshed out, but sterling continues to perform well. After breaking below the EUR/GBP 0.86 level last week, the British pound today rose again a few pips against the euro, approaching the 0.855 area. Japanese authorities Friday’s ‘USD correction’ did not use post-payrolls or lower market liquidity to force some JPY short positions. Today at least it seems that way This window of opportunity is closing With the USD/JPY pair rebounding near 162.3 compared to a low of 160.49 on Friday and a multi-year high of 162.84 earlier last week. The combination of a 30-year auction, the yen testing multi-year lows, and the Japanese authorities playing a bit of a game of poker with the markets over an intervention strategy could cause a very big mix tomorrow morning. After the completion of this report, the ISM US Services Index will be released, but a major surprise will likely be needed to stimulate a sustained market reaction.
News and opinions
european stability mechanism, The lender of last resort to eurozone countries released its inaugural annual eurozone stability monitoring report today. He warns that the bloc will not be immune to the shocks that lie ahead. The ESM sees three important pockets of vulnerabilities. The first is erosion of fiscal space, This is partly due to increased defense spending needs. the second It is structural Exposure to power outages Caused by geopolitical tensions. Finally, the European Stability Mechanism says European investors are exposed to the possibility of repricing US Treasuries and stocks. He added that sovereign markets in the East Asian region have become increasingly dependent on price-sensitive investors (such as hedge funds). ESM has come up with Negative scenario (relative to the European Commission baseline), They are defined as two shocks occurring simultaneously: Prolonged geopolitical tensions that raise energy prices and keep uncertainty high, and a sharp repricing of US assets. This would push the eurozone economy into recession With negative growth year-on-year until the fourth quarter of 2027, raising inflation to nearly 5% by the end of 2026 and putting public debt on another upward trajectory. The European Stability Mechanism urges countries to do so Rebuild financial reserves quickly, Spend efficiently and promote structural reforms so they are prepared when the next shock hits.
Belgian Budget Control Committee He said an additional preliminary estimate was presented to the government A fiscal effort of €7.9 billion is needed by the end of 2029 to comply with European deficit rules. (based on expenditure), as reported by several Belgian media. The conflict in the Middle East, which has led to high inflation, low economic growth, and a high interest rate burden, has thrown government finances off track. The €7.9 billion figure is far more than the €4.9 billion the committee had forecast in its report in March, and exceeds the roughly €7 billion the government had been preparing internally. The policy without change would raise the budget deficit by the end of De Wever I in 2029 to 5.8% and then to 6.3% within five years. The debt ratio is expected to rise from 108% this year to 117% in 2029 and 122.8% in 2031.
