Global stocks and S&P futures are higher while Nasdaq futures are on a tear after Micron’s sales forecast blew the lights out, brushing aside fears over a near-term pullback in the AI trade, while Qualcomm set aggressive targets at its investor day in New York. As of 8:00am ET, a revival of the AI demand theme is sending contracts on the Nasdaq 100 up 2.1% while S&P 500 futures are up a more modest 0.7%. MU is +18% pre-market, pushing Semis higher (SOXX +5%, DRAM +12%) while Mag7 - the companies which enable all this chip spending - are mostly lower. As Goldman's Delta 1 desks asks, how much longer will they be willing to see their stock languish while funding semiconductor outperformance? Korea's KOSPI rallied 5.5% overnight (closing well off the highs) and remains ~2.4% below pre-Flash Crash levels. While the AI theme is bid pre-market, this is not an ‘Everything Rally’ with Cyclicals seeing a mixed performance with Banks flat, Regional Banks lower, Energy down with crude, Discretionary mixed, and Materials flat. Within Defensives, Staples are weaker, HC mixed, and AI-related Utils names are higher. Brent crude dropped 1.4% to below $73 a barrel, erasing all Iran war gains, on fears of a supply glut following a ramp-up in flows through the Strait of Hormuz. Bond yields are flat to +2bp as the yield curve steepens, but the USD starts the session lower for the first time in 6 sessions. US economic data calendar includes May personal income/spending, 1Q GDP revision, May durable goods orders, weekly jobless claims and May Chicago Fed national activity index (8:30am) and June Kansas City Fed manufacturing activity (11am). Fed speaker slate includes Bowman (8:45am), Goolsbee (2pm, 6:30pm) and Williams (3:40pm).

In premarket trading, Micron is 16% higher premarket after its quarterly sales forecast blew past estimates; Qualcomm is up 12% after it estimated more than $15 billion of annual revenues by fiscal 2029 from AI components in data centers. Both look set to challenge all-time highs today. Meanwhile, as semiconductor stocks surge after Micron’s update, the Mag 7 hyperscalers who fund them are all down: Microsoft (MSFT) -0.4%, Amazon (AMZN) -0.5%, Meta Platforms (META) -0.2%, Apple (AAPL) -0.5%, Alphabet (GOOGL) -1.2%

• ARS Pharmaceuticals (SPRY) sinks 20% after the biotech company said there has been no new commercial formulary additions or coverage decisions for its epinephrine nasal spray, neffy, in the July 1 cycle.
• Bio-Techne (TECH) climbs 20% after Merck agreed to acquire the company for $73 per share in cash, representing a total enterprise value of around $11.3 billion.
• BlackBerry’s (BB) US-listed shares rise 8% after the software company boosted its revenue forecast for the full year.
• Dollar Tree (DLTR) falls 5% after saying Mantle Ridge and another stockholder sold 12.8 million shares to JPMorgan and Goldman Sachs.
• HB Fuller (FUL) slips 8% after agreeing to acquire Advanced Medical Solutions Group Plc, a British maker of tissue-healing medical products, for $868 million.
• IBM (IBM) gains 3% after the technology giant unveiled the world’s first sub-1 nanometer chip technology.
• Jefferies Financial (JEF) inches about 1% lower after posting second-quarter earnings that missed analyst estimates as the bank pulled in less fees from Point Bonita, which bet on the embattled auto-parts supplier First Brands Group.
• Micron Technology (MU) jumps 18% after its quarterly sales forecast exceeded Wall Street estimates, signaling that an AI-fueled growth run remains strong.
• Trip.com ADRs (TCOM) fall 13% after the company reported adjusted earnings for the first quarter that missed analyst estimates. The online travel agency also expects slower 2Q revenue growth.
• Qualcomm (QCOM) gains 10% after the chipmaker forecast sales of more than $15 billion a year by fiscal 2029 in the market for AI components in data centers.
• Wendy’s (WEN) climbs 13%, on track to extend gains after rallying 26% on Wednesday, as the meme-stock crowd rallies behind the fast-food chain

In other corporate news, Lockheed Martin has been awarded a contract worth as much as $35 billion from the Defense Department to quadruple production of missile-defense interceptors as part of a broader effort by the Trump administration to bolster munitions output.
ARS Pharmaceuticals is down 23% premarket after the biotech provided updates on payer access for neffy, its FDA-approved epinephrine nasal spray, and an updated financial outlook for 2026 and 2027.

Nasdaq futs have erupted, following earnings by Micron and an update from Qualcomm. For Micron (+18.4% pre-market), its Q3 adj. EPS and revenue beat estimates while its Q4 guidance also beat consensus. In terms of commentary, they said that tight conditions are expected to persist beyond FY27, and it has no line of sight on when supply can catch up with demand. For Qualcomm (+12% pre-market), the Co. raised its FY29 non-handset revenue target to USD 40bln, while announcing a strategic relationship with Hugging Face to advance open, developer-driven AI from devices to cloud infrastructure.

The US optimism was palpable in other regions too. A benchmark for Asian stocks advanced 1.4%, with Micron peers SK Hynix Inc. and Samsung Electronics Co. rallying in South Korea. The technology sector far outperformed a 0.6% gain in Europe’s Stoxx 600.

The four most dangerous words in finance are now a daily occurrence, especially by people who should know better. Barclays’ global chair of research, recalling the 82% collapse in semiconductor stocks that burst the dotcom bubble, says this time is different. Addressing concerns about a cyclical bust in semis after their meteoric rise was followed by a pullback in early June, Barclays’ Ajay Rajadhyaksha says: “At the risk of using the four most dangerous words in finance, this time is different. Earnings have exploded, order books are full into 2027, and forward multiples are eminently reasonable.”

He says there may eventually come a boom-bust cycle, but not in 2026. “Despite recent equity wobbles, the semiconductor story is real, it is massive, and it is not going away anytime soon,” he adds.

“In a tech sector with strong growth and high expectations, we think investors will continue to look for signals that the AI adoption theme is playing out as expected,” said Richard Flax, chief investment officer at Moneyfarm. “Micron’s strong results are another data point that supports that positive thesis.”

The pre-market indication for Micron is set to comfortably exceed the roughly 10% absolute move implied by the options market. If these gains hold, it will be another example from the AI complex of seemingly expensive pre-earnings options ultimately proving justified by realized price action.

WTI crude is back below $70 a barrel as oil prices for easier global supply. At 8:30 a.m. ET, Bloomberg Economists expects a hot PCE reading will likely reinforce the hawkish tilt by the Fed at its meeting earlier this month. Meanwhile, the dollar is drifting lower ahead of the print.

Attention now turns Thursday to the release of May’s PCE index, the Federal Reserve’s preferred inflation gauge. Forecasters expect the data to show acceleration on both a monthly and year-over-year basis. Such a reading is unlikely to challenge a growing consensus at the Fed around the need for interest-rate hikes this year. While investors have dialed back bets on the scale of rate increases over the coming year as oil prices shed their war-driven premium, markets continue to see a hike as soon as September.

“If that comes in near expectations or higher, then we see the dollar drive further north,” said Nick Twidale, chief market analyst at AT Global Markets. “We could also see a dent in the positive risk sentiment.”

Markets will also follow remarks from New York Fed President John Williams, Fed Vice Chair for Supervision Michelle Bowman and Austan Goolsbee of the Chicago Fed later today. Given Chair Kevin Warsh’s refusal last week to offer any clues about his own outlook for rates, traders will likely put a premium on commentary from colleagues. 

Meanwhile, China kicked off marketing up to €5 billion ($5.7 billion) of sovereign bonds in what could be its largest-ever such deal in euros. Separately, the nation’s central bank is introducing an overnight tenor into its open-market operations, a key step toward reshaping how it steers short-term borrowing costs.

In less notable news, on Wednesday, JPMorgan, Goldman Sachs, Citigroup and Morgan Stanley were among the big banks to boost their dividends after passing the latest Fed fluff stress tests. Separately, Jefferies second-quarter earnings came in light as it pulled in less fees from Point Bonita, which bet on the embattled auto-parts supplier First Brands Group.

Europe's tech-light Stoxx 600 has only engineered a 0.5% gain even as oil prices continue to tumble. Technology and utilities shares leading gains, while the biggest laggards are media and energy equities. Here are the biggest movers Thursday:

• 3i Group shares jump as much as 11% after the investment company revealed like-for-like growth at discount retailer Action, the single largest holding in its portfolio, accelerated over the last six weeks
• Barratt Redrow shares rise as much as 4.9%, outperforming UK homebuilder peers, after shareholder Phoenix Asset Management Partners said the company should be materially increasing its share buybacks
• EasyJet shares rise as much as 6.6% to the highest level in a year after the UK budget airline rejected a fourth takeover bid from US investment firm Castlelake
• NCAB shares rise as much as 7.5% after SEB Bank set a Street-high price target for the electronics retailer on “sustainably elevated” PCB prices
• Heidelberger Druckmaschinen gains as much as 8.2% following an acquisition by the printing company that spurred an upgrade at MP Capital Markets
• Halfords shares rise as much as 17% to their highest level in over two years after the UK vehicle parts and bicycle retailer’s earnings beat estimates and management flagged a strong start to FY27
• Moonpig shares rise as much as 12% after the giftcard retailer slightly beat consensus estimates for profit. Analysts at Panmure Liberum flag Moonpig’s “crazy cheap” valuation and strong cash returns
• H&M slips as much as 5.2% after reporting second-quarter earnings and saying sales in June are expected to be on par with the same month the previous year

Earlier in the session, Asian stocks rose, led by tech gains in South Korea and Japan after a bullish outlook from Micron Technology and Asian chipmakers’ US-listing plans revived confidence in the artificial intelligence trade. The MSCI Asia Pacific Index gained 1.5%, with SK Hynix, Samsung Electronics and Advantest providing the biggest boost to the gauge. Korea’s benchmark rose 5.4%, while the tech-heavy Nikkei 225 Stock Average in Japan climbed 4.6%.  Renewed optimism followed US-based Micron’s better-than-expected sales forecast, reinforcing confidence that AI‑driven growth remains strong. The role of Asian chipmakers in the global AI supply chain was underscored as Korea’s SK Hynix and Japan’s Kioxia unveiled further details of plans to list in the US. Shares of SK Hynix surged after disclosing plans for a $29 billion US listing, a move that analysts viewed as boosting valuations through capacity expansion and greater foreign investor access. Kioxia climbed as its CFO said it intends to offer US depositary receipts in the spring of 2027. Here Are the Most Notable Movers

• Trip.com ADRs drop 14% in US premarket trading after the company reported adjusted earnings for the first quarter that missed analyst estimates. The online travel agency also expects slower 2Q revenue growth.
• Two founder group firms of Lodha Developers sold 19.88 million shares, or a 1.99% stake, in block deals to raise 18.65 billion rupees ($197.4 million), according to terms of the deal seen by Bloomberg News.
• Topix rose 1.3% to 4,016.47 with electric appliances and information technology sector higher. Nikkei 225 advanced 4.6% to 72,366.34.
• Chip stocks including Advantest and Tokyo Electron were some of the biggest gainers on the Nikkei 225 after Micron Technology forecast stronger-than-expected revenue.
• Evergrande Property Services shares tumble as much as 27% in HK, the most in nearly three years, after the firm said discussions between potential sellers and a purchaser ended.
• Chinese chip-related stocks climb after Micron Technology forecast stronger-than-expected revenue and reported third-quarter earnings that topped estimates. Shares of Alibaba drop in Hong Kong after Anthropic accused the company of waging a large-scale effort to “illicitly” access its Claude artificial intelligence model.
• Sunny Optical shares fall as much as 12%, the most in more than a year, after co. holds investor day. Citi’s note said co.’s optical interconnect commercialization remains at an early stage, with validation ongoing.
• Frasers Property shares rise as much as 4.7% after the Singapore real estate developer said its on-balance sheet hospitality assets are expected to decrease from about S$3.7b to S$2.5b, while keeping AUM at S$4.2b.
• Techtronic Industries’ shares surge as much as 8.1% to a four-year high after the company repurchased nearly 1% of its shares.

MS&AD Insurance Group Holdings shares fell as much as 5.1%, the most since Mar. 30, following a large discounted block trade.

In FX, the greenback has halted its recent ascent with the Bloomberg Dollar Spot Index lower by 0.1% but still at levels not seen since November last year. USDJPY trades near a record high just shy of 162, with the BOJ on intervecntion watch. 

In rates, the recent rally in Treasuries is pausing for breath with the US 10-year yield up 2bps. Treasuries are slightly cheaper across the curve, unwinding a small portion of Wednesday’s aggressive rally as stock futures advance following Micron’s blowout forecast. Nasdaq 100 futures lead gains as bull case for the artificial-intelligence trade is reaffirmed. US long-end yields are nearly 2bp higher on the day with front-end tenors outperforming, steepening 2s10s curve by 1.5bp from near flattest level in more than a year; 10-year, higher by 1bp near 4.405%, trails bunds and gilts in the sector by 2bp and 1bp. Treasury auction cycle concludes with $44 billion 7-year notes sale at 1pm New York time, following uneventful 2- and 5-year notes over past two days. Focal points of US session include May personal income and spending data, which contain PCE price indexes, and a 7-year note auction. 

In commodities, Brent crude futures are down a further 1.4%, having erased their gains since the conflict in Iran began, while WTI crude oil futures are down more than 1% as Middle East exports via the Strait of Hormuz ramp up. The notable downside in energy markets also changes the context in which traders will receive today’s backward-looking US PCE data for May.  Spot gold has lost a further 0.2%, having slipped below the $4,000/oz threshold. Bitcoin is rising 1.3%. 

Looking at today's calendar, US economic data calendar includes May personal income/spending, 1Q GDP revision, May durable goods orders, weekly jobless claims and May Chicago Fed national activity index (8:30am) and June Kansas City Fed manufacturing activity (11am). Fed speaker slate includes Bowman (8:45am), Goolsbee (2pm, 6:30pm) and Williams (3:40pm)

Market Snapshot

Top Overnight News

• Brent erased its wartime gains as flows through the Strait of Hormuz accelerated. But tensions remained as Donald Trump warned that tolls in the waterway are a red line issue in negotiations with Iran. BBG
• Iraq will consider all available options if its OPEC quota is ‌not significantly increased and has weighed leaving the producer group, sources with knowledge of Iraqi oil policy told Reuters. The prospect of OPEC's second-largest producer considering an exit would be a further blow to the group after the departure this year of the United Arab Emirates. Iraq is one of the five founding members of OPEC, which was formed in the Iraqi capital. RTRS
• China started marketing up to €5 billion of sovereign bonds in what would become its largest-ever such deal in euros.
• The BOJ needs to raise interest rates every few months toward a neutral level of around 2%, board member Naoki Tamura said. BBG
• Japan’s 20-year bond auction drew the weakest demand since the market upheaval just over a year ago as worries about inflation and fiscal policy came back to the fore. BBG
• The EU’s trade deal with the US is set to go into effect after the bloc gave its final sign-off ahead of Trump’s deadline. BBG
• Colombian electoral authorities confirmed conservative Abelardo de la Espriella as the winner of the presidential election. He’ll take office on Aug. 7. BBG
• Meta is racing to replace human moderation with generative artificial intelligence, as it undergoes a broader cost-cutting drive to offset chief executive Mark Zuckerberg’s vast spending on AI. FT
• Qualcomm shares jumped premarket (QCOM +12% premkt) after forecasting more than $15 billion in annual AI chip sales by fiscal 2029. BBG
• Fed said 32 large banks are well positioned to weather a severe recession and continue lending under the latest stress test, while the banks tested absorbed more than $700bln in hypothetical losses and saw capital decline only 1.6%, to remain above minimum requirements. Furthermore, the Fed reaffirmed its plan to maintain capital levels steady as it adjusts the testing process and will set new stress capital buffers following the 2027 test. The banks promptly revealed plans to return hundreds of billions in capital to investors through dividends and buybacks. 

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mixed, albeit with a mostly positive bias and with the KOSPI leading the gains as tech and Nasdaq futures rebounded from the prior day's lows following strong earnings from Micron. ASX 200 was dragged lower by weakness in mining, materials, resources and energy stocks, while better-than-expected headline Australian jobs data failed to inspire and was mostly driven by part-time jobs. Nikkei 225 rallied back above the 72,000 level amid a resurgence in tech and lower oil prices, while markets were unfazed by comments from BoJ hawk Tamura, who called for hiking rates every few months. KOSPI outperformed amid a rally in Samsung Electronics and SK Hynix, with the latter sitting on double-digit percentage gains amid its US IPO plans. Hang Seng and Shanghai Comp were mixed in the absence of any major fresh drivers and with the Hong Kong benchmark dragged lower by losses in miners and further weakness in hyperscalers, including Alibaba, after Anthropic accused the Co. of illicitly accessing AI models in a letter to US officials.

Top Asian News

• USGS reported a magnitude 7.1 earthquake struck off the coast of Venezuela and that a second 7.5 magnitude earthquake hit the same area, while it warned of a potential massive catastrophe from the Venezuela quake, and estimated the quake death toll could exceed 1000, according to NYT.
• Earthquake reportedly hit Japan off the Iwate prefecture with a preliminary magnitude of 6.9, while NHK said Japan quake shaking intensity was 6+ on a scale of 7, while no tsunami warning was issued.- Japan's LDP is facing internal friction, with lawmaker Obuchi reportedly offering to resign if consumption tax is cut to 0%, NTV reported.

European bourses (STOXX 600 +0.6%) begin Thursday's trade with broad gains, with tech-heavy indices leading following positive Micron earnings (AEX +0.8%, DAX 40 +0.6%). As the Iran conflict fades, with energy prices now reversing the wartime gains, equities in Europe can begin to catch up to their peers in the US and Asia. Investors are also seeing Europe as a safer place to place money due to its lack of tech giants, protecting themselves from any AI-related selloff. European sectors highlight the positive bias. Technology (+2.6%), unsurprisingly, is the clear outperformer. Utilities (+1.5%) and Financial Services (+0.8%) complete the top 3 sectors. To the downside is Media (-0.9%), Food, Beverages & Tobacco (-0.4%) and Chemicals (-0.3%).

Top European News

• UK Chancellor Reeves reiterated her backing for MP Andy Burnham, and stated that it is clear he is committed to the fiscal rules. On borrowing more for defence spending, she said the DIP will involve more money. Will not maintain current level of economic growth due to Middle-East conflict and decisions to be make on Jackdaw and Rosebank soon.
• Two of the UK's largest trade unions are increasing pressure on Andy Burnham not to pick Ed Miliband as the Chancellor, arguing that his North Sea oil policy has damaged jobs in the sector, according to FT.
• German Deputy Defence Minister Schmid said they are well underway on reaching the 3.5% defence spend target and that different options to be discussed on the subject of the Eurofighter.

FX

• G10s are mixed but mostly stronger against the Buck with breadth narrow as the Buck rally loses steam and fails to provide a bias to peers.
• USD benefitted this week from the risk-on mood into Micron earnings, which were released after US markets closed on Wednesday. Given the stellar report from the memory maker, risk-on trade has resumed, with equities (specifically tech–heavy indices) bid. DXY a touch lower on the day given the risk tone, trades at the lower end of its 101.44-101.66 range; now looking to PCE.
• Antipodeans lacklustre against the Buck despite the heightened sentiment. Aussie digested better-than-expected headline employment change, which failed to spark a meaningful reaction following on from the mixed inflation report in the prior session, with much of the change driven by temporary activity. AUD/USD +0.1% found buyers below 0.69, AUD/NZD +0.1% lifted from just below the 1.22 mark.
• USD/JPY continues to lack a bias as it hovers around levels not seen since July 2024. BoJ’s Tamura spoke overnight, sticking to the hawkish bias, advocating for tightening “once every few months” to a terminal of 2%. Despite the remarks initially helping the Yen, the move failed to stick, with the pair flat and approaching 162 to the upside.
• GBP remains focused on the Fiscal/Chancellor situation. Current Chancellor Reeves on the wires this morning, not providing too much new but seemingly teeing herself up to keep the role at no. 11. Prior to this, The Times reported that Miliband has been developing key economic policies for the new government, with particular reference to fiscal implications, a point potentially unwelcome by UK investors given his track record as Energy Secretary. GBP has not taken the skew from Gilts which underperform peers today amid the continued Miliband reporting, GBP/USD +0.1% after bouncing off 1.3150.

Fixed income

• Global fixed benchmarks are softer across the board, albeit only modestly. This does come after the benchmarks surged in Wednesday's session, causing yields to break key markers, as energy prices continued to fall.
• USTs (-3 ticks) have pulled back from Wednesday's and Today's peak of 110-01, with 10yr yields slipping below the support level of 4.422%. Despite the positive 2-year auction on Tuesday, it failed to feed through to the 5-year tap. A busy data docket is ahead, with Core PCE Price Index (the Fed's preferred inflation gauge) expected to hold steady at 3.3% Y/Y. Final Q1 GDP is also expected to remain unchanged at 1.6%. Initial jobless claims, durable goods orders, Atlanta Fed GDP and a 7-year auction are also on the docket.
• Bunds (+3 ticks) and Gilts (-9 ticks) are also softer, but off worst levels. For German debt, its Q3 issuance plan was left unchanged, looking to raise EUR 138bln in the quarter. Bunds were unreactive following the announcement. ECB's Schnabel was on the wires this morning, reiterating her stance that the ECB will need to raise rates further to bring back inflation to 2%, while stating that although the short-term situation looks better than expected, the ceasefire is no reason for policymakers to let their guard down. For Gilts, although they were unreactive, the Guardian reported that some senior officials are pushing incoming-PM Burnham to issue GBP 20bln of "war bonds" to pay for higher defence spending. We are now attentive to specifics around the duration and magnitude of any theoretical issuance.
• JGBs (+5 ticks) consolidated, with a poor 20-year auction capping the upside. The b/c ratio dropped to 2.97, below the prior 4.01x and 12-month average. No significant move seen to hawkish BoJ speak overnight.
• German Q3 debt issuance plan unchanged, as expected: to raise EUR 138bln in Q3, set to issue EUR 512bln in 2026.
• UK sells GBP 1.5bln 0.50% 2029 Gilt via tender: b/c 3.61x (prev. 3.86x), average yield 4.062% (prev. 3.841%).
• Japan sells JPY 530.4bln 20-year JGBs; b/c 2.97x (prev. 4.01), average yield 3.542% (prev. 3.711%)

Commodities

• Attention today has been on a recent route dispute on the Strait of Hormuz. The IRGC rejected a newly formed shipping lane, which traverses towards Omani waters, with the Group stating that it only accepts passage through it own routes. The IRGC warned that any attempts to pass through the Strait, outside of their own route, will be dealt with accordingly.
• Focus also on the Lebanon situation. Initially a US official stated that Israel had pulled back from parts of its buffer zone in Lebanon, which was then pushed back by Lebanese sources; it was then later confirmed by the Israelis that it had not received any instructions to pull back. This spurred some mild strength in the crude complex at the time.
• WTI and Brent are once again on a weak footing this morning, trading lower by c. 1.2% and 1.3% respectively. Markets continue to cheer the reopening of the Strait, with dozens of ships continuing to pass through daily. It is unclear how long this exuberance will last, given the risks surrounding the new Strait route and conflicting remarks and the volatile Lebanon-Israel situation.
• Also interesting was comments made by a senior Iraqi Oil Ministry official, who said the nation will consider all available options if its OPEC quota is not significantly increased and have considered the idea of leaving OPEC
• Spot gold trades shy of the USD 4k/oz mark, and holds within a USD 3,962-4,018/oz range, which is towards the bottom end of Wednesday’s trading bands. Analysts highlight several factors for the recent move lower in gold, which includes: 1) loss of safe-haven appeal, 2) stronger USD, 3) hawkish shift at the Fed, spurred following Warsh’s debut. On the latter point, Warsh ultimately highlighted the importance of price stability, which helped to push back on traders eyeing a debasement trade.
• Elsewhere, for the yellow metal, Bloomberg reported that major Chinese banks are reportedly shutting services supporting retail precious metals trading after gold and silver volatility. Elsewhere, 3M LME copper is firmer this morning, and trades within a USD 13,056.5-13,242.13/t range.
• US President Trump said he spoke with oil companies and that oil companies are not reducing gas prices enough, adding they will be in trouble if they are gouging.
• Saudi Arabia is reportedly set to restart Ras Tanura (550k BPD) oil exports as Gulf flows rise.
• Senior Iraqi Oil Ministry official said the nation will consider all available options if its OPEC quota is not significantly increased and have considered the idea of leaving OPEC. The current plan is to remain and gain higher quota.
• Iraqi Government spokesperson said the nation is working to restore full oil export capacity and aims to raise production to 7mln BPD over the coming years.
• China is reportedly raising its refined fuel export allowance for July, according to reports.
• Early reports suggest oil export and production were unaffected by the Venezuela earthquakes, according to Bloomberg's Blas.
• Chevron (CVX) CFO said gas prices will normalise, following pressure from President Trump on big oil companies, CNBC reported.
• Major Chinese banks are reportedly shutting services supporting retail precious-metals trading after gold and silver volatility, Bloomberg reported.

Trade/Tariffs

• The EU has given the US trade deal final approval, according to Bloomberg.
• UK Government announced new steel trade measures, effective July 1st. It will reduce the overall quota volumes by 51% and that any imports above would have a 50% tariff.

Central Banks

• ECB's Schnabel said the short term situation now looks better than had been expected but the ceasefire is no reason for policymakers to let their guard down. We will need to raise interest rates further in order to bring inflation back to the two percent target over the medium term.
• BoJ Board Member Tamura said it is important to push the BoJ’s policy rate closer to neutral to avoid being forced to hike rates sharply later, and his view is for the BoJ to raise its policy rate once every few months towards a neutral level of around 2%. Tamura also stated that if upside price risks become more likely to materialise, the BoJ should not hesitate to speed up rate hikes or raise rates by a larger amount, while he voted against the decision to pause tapering from next fiscal year, as the BoJ should normalise the balance of its bond holdings as soon as possible.

Geopolitics

• US President Trump reiterated that Iran will never have a nuclear weapon, while he adds that we will have peace in the Middle East. Trump separately commented that it is unacceptable to have fees on the Strait of Hormuz and they are doing great in negotiations with Iran, while he added that the Iran war powers vote is meaningless.
• US Secretary of State Rubio said we hope to reach a final agreement with Iran, but not at any price, and are now entering a new phase that hopefully leads to peace. Will not accept that Hormuz belongs to any nation-state. US President Trump has been fundamentally clear about the tolling issue. It can be a toll or a fee, but it is all semantics.
• US Senate Republicans defeated a war powers resolution regarding Iran in a 50-47 vote, to appease President Trump following a heated lunch meeting, according to NYT
• A US State Department official said Israel has pulled back from part of its buffer zone in southern Lebanon as an act of good faith. However, this was later refuted, with a Lebanese military source telling Al-Araby that the Israeli army has not withdrawn from any point in the areas it occupies in southern Lebanon. This was also denied by a senior Israel official.
• "Lebanese media outlets are reporting that an Israeli drone attacked the village of Tabit, in the Nabatia region in southern Lebanon", via Kan's Kais.
• Five South Korean ships were said to have exited the Strait of Hormuz, although the time frame is uncertain.
• Ukraine President Zelensky confirmed its military hit an oil depot in Russia’s Krasnodar region and two oil refineries in the Ufa region.

US Event Calendar

• 8:30 am: May Personal Income, est. 0.4%, prior 0%
• 8:30 am: May Personal Spending, est. 0.6%, prior 0.5%
• 8:30 am: May PCE Price Index YoY, est. 4.1%, prior 3.77%
• 8:30 am: May Core PCE Price Index MoM, est. 0.3%, prior 0.2%
• 8:30 am: May Core PCE Price Index YoY, est. 3.4%, prior 3.29%
• 8:30 am: 1Q T GDP Annualized QoQ, est. 1.6%, prior 1.6%
• 8:30 am: 1Q T Personal Consumption, est. 1.4%, prior 1.4%
• 8:30 am: 1Q T GDP Price Index, est. 3.5%, prior 3.5%
• 8:30 am: 1Q T Core PCE Price Index QoQ, est. 4.4%, prior 4.4%
• 8:30 am: Jun 20 Initial Jobless Claims, est. 225k, prior 226k
• 8:30 am: Jun 13 Continuing Claims, est. 1801.5k, prior 1810k
• 8:30 am: May P Durable Goods Orders, est. -5%, prior 8%
• 8:30 am: May P Durables Ex Transportation, est. 0.6%, prior 1.1%
• 8:30 am: May Chicago Fed Nat Activity Index, est. 0.15, prior 0.14

Central Bank Speakers

• 8:45 am: Fed’s Bowman Speaks on Small Bank Supervision
• 2:00 pm: Fed’s Goolsbee on CNBC
• 3:40 pm: Fed’s Williams Gives Keynote Remarks
• 6:30 pm: Fed’s Goolsbee in Moderated Discussion

DB's Jim Reid concludes the overnight wrap

Markets are in a buoyant mood this morning, with Brent crude oil prices finally back at their pre-conflict levels. They’ve fallen another -1.70% overnight to $72.49/bbl, which is almost exactly in line with their $72.48/bbl level immediately before the US and Israel began their strikes on Iran on February 28. It comes as flows through the Strait of Hormuz have continued to ramp up, with the number of vessels getting through at its highest since the conflict started. And more broadly, the oil price decline has eased fears about a stagflationary shock and aggressive rate hikes to deal with any inflation.

Alongside the oil price declines, the other positive story overnight came from Micron’s earnings after the US close. Their revenue outlook was at $50bn for the fiscal fourth quarter running through August, well above the $43.2bn analyst consensus. So that reignited hopes about AI-fuelled growth and helped to push back against fears we were in some kind of bubble. And in turn, Micron’s shares surged nearly 16% in after-hours trading, and futures on the NASDAQ 100 have also surged +1.77% overnight. So that tech strength has helped to lift US equities more broadly, with S&P 500 futures up +0.53%, finally pointing to a recovery after 3 consecutive losses for the index.
This positivity has been clear in Asian markets overnight, with the Nikkei (+4.10%) and the KOSPI (+5.73%) both surging, alongside a strong gain for the CSI 300 (+1.61%). The main exception to that pattern has been the Hang Seng (-1.38%), which is currently on course for a one-year low. But otherwise, sentiment has been very positive, and the Japanese Yen has also stabilised overnight, up +0.03% to 161.73 per US Dollar. For reference, it closed at its weakest since 1986 yesterday, at 161.78 per US Dollar, although it hasn’t quite got to the intraday low in that time, as it briefly traded at 161.95 back in July 2024.

Ahead of that overnight positivity, oil prices had already seen a decent decline, with Brent crude falling -4.33% to $73.74/bbl. In part, that was thanks to growing signs of more traffic flowing through the Strait of Hormuz. Moreover, multiple US officials were sounding negative over the prospect of tolls in the Strait of Hormuz. For instance, Trump posted that Iran had informed the US there would be no tolls or charges in the Strait of Hormuz, and that “If this is false information, negotiations would end, immediately!” Meanwhile, Secretary of State Rubio said that “No country is allowed to charge tolls or fees on an international waterway”. So the newsflow led to growing optimism about a normalisation in the energy market, which would help to avoid any lasting inflationary consequences.

This backdrop helped equities to stabilise after their losses on Monday and Tuesday, with the S&P 500 (-0.10%) only posting a modest decline. That came as the Mag 7 (-0.82%) fell further into correction territory, having now fallen -11.6% since its May 28 peak, whilst the S&P 500’s energy sector (-1.73%) also struggled amid the decline in oil prices. But there was some positivity more broadly, with almost two-thirds of the S&P constituents higher on the day, leaving the equal-weighted S&P 500 up +0.71%. And over in Europe, the STOXX 600 (+0.08%) posted a marginal gain as well.

Whilst equities were stabilising, there were much bigger milestones for sovereign bonds, as lower oil prices helped to ease concerns about inflation. In fact, the 1yr US inflation swap (-12.3bps) fell to just 2.16%, marking its lowest level since October 2024. And over in the Euro Area, the 1yr inflation swap (-14.0bps) fell to a 3-month low of 2.31%. So in turn, that meant investors priced out the chance of rate hikes for the months ahead. For instance, just 35bps of Fed hikes are now priced in by December, down -2.9bps on the day. And similarly for the ECB, just 29bps more hikes are priced in by December, down -2.5bps on the day.

For sovereign bonds, that combination of easing inflation fears and more dovish central bank pricing was a strong one. So yields saw very large falls on both sides of the Atlantic, and the 10yr Treasury yield (-10.5bps) fell back to 4.39%. That was echoed in Europe too, where yields on 10yr bunds (-5.5bps) reached a 3-month low of 2.86%, whilst yields on 10yr OATs (-5.2bps) and BTPs (-5.5bps) also moved lower. There was also a decent round of yield curve flattening, as longer-dated yields posted bigger falls than the front-end. So the 2s10s Treasury curve (-5.4bps) fell to just 24bps by the close, its flattest since March 2025. And over in Germany, the 2s10s curve (-2.1bps) fell to 32bps, its flattest since February 2025.

Otherwise in Europe, those yield declines saw a modest pullback after hawkish comments from the ECB’s Schnabel. It wasn’t enough to outweigh the effect of lower oil prices, but she pointed to more hikes ahead, saying the ECB “will need to continue raising interest rates in order to bring inflation back to our target of 2% in the medium term”. Moreover, she also said that “the ceasefire is no reason for monetary policy to let its guard down”. So those comments re-affirmed Schnabel’s position at the hawkish end of the ECB Governing Council.

Here in the UK, gilts continued to outperform their European counterparts, reflecting how they’ve seen some of the biggest moves in either direction since the Iran conflict began. So the 10yr gilt yield fell -7.2bps yesterday to 4.68%, its lowest level in 3 months.

Meanwhile on the political side, Chief Secretary to the PM Darren Jones ruled himself out of succeeding Keir Starmer as Labour leader. So that meant expectations continued to rise that Andy Burnham could win without a contest, and the Polymarket probability of him becoming PM in 2026 is now at 98%. Speaking of the UK, the Deutsche Bank Research Institute piece on the 10th anniversary of the Brexit referendum can be found here, and to those who’ve signed up to the event today, it’s still going ahead.

Elsewhere, there were a few other notable market moves yesterday. The dollar index (+0.20%) continued its recent rise, reaching its highest level since May last year. Then on the opposite end, gold fell below the $4,000 level for the first time since November (-2.86% to $3,999/oz) and is now more than -25% below its January peak. Meanwhile, yesterday saw Bitcoin reach its lowest intraday level since October 2024, at $59,023, although it’s since recovered this morning to $60,956.

Finally, there were a couple of other data releases yesterday, including the Ifo Institute’s business climate indicator from Germany. That rose to 85.6 in June (vs. 85.5 expected), marking a second monthly gain after falling back in March and April. Interestingly, the current assessment indicator was up to 87.0, its highest since July 2024, but the expectations indicator only rose to 84.1, still clearly beneath its levels before the Iran conflict. Over in the US, we also got new home sales for May, which unexpectedly fell to an annualised rate of 580k in May (vs. 640k expected).

Looking at the day ahead now, US data releases include the PCE inflation reading for May, the third estimate of Q1 GDP, the weekly initial jobless claims, and preliminary durable goods orders for May. Otherwise from central banks, we’ll hear from the ECB’s Moulin, Lane, Cipollone, and the Fed’s Bowman, Williams and Goolsbee. Meanwhile, the ECB will also publish their Economic Bulletin.