Market News

FUNDAMENTAL OVERVIEW

The S&P 500 has been mostly rangebound this month as the US-Iran crisis brought back inflation and growth risks. This has also happened amid overcrowded stock market positioning which has led to deleveraging across the board.

The latest weakness seems to be more about hedging/deleveraging activity ahead of tomorrow’s FOMC decision rather than fresh Middle East news. In fact, the ceasefire is still intact, and the diplomatic efforts are ongoing (although things can change on a dime).

The Fed is expected to hold interest rates steady but there might be one or two dissenters voting for a rate hike at this meeting already. The forward guidance will…

• July consumer confidence 86 vs 85 expected
• Prior 84

The reading continues to reaffirm a further rebound in French consumer sentiment in July, though keeping well below the peak earlier this year in February of 92. And overall, the estimate is still well below the long-term average reading of 100.

French households are seen feeling better about their personal financial situation, past and future, in July. Both estimates of the past and expected financial situation showed a two point increase to -26 and -14 respectively on the month. Besides that, consumers also were more optimistic about their expected saving capacity and current ability to save. So, there's that.

But perhaps the most notable part of the report is a drop in inflation…

US Stocks Mixed as Oil Extends Sharp Decline on Middle East Optimism – Dow up 0.5%

US financial markets delivered a mixed performance overnight as investors continued to respond positively to signs of easing tensions in the Middle East. Sentiment improved after President Trump stated that the US was having “good talks” with Iran, raising hopes that diplomatic progress could eventually lead to increased oil exports through the Strait of Hormuz and help alleviate concerns over global energy supply.

The prospect of improving supply conditions weighed heavily on crude oil prices, with Brent crude tumbling 9.26% to US$87.82 a barrel, while West Texas Intermediate (WTI) fell 8.19% to US$82.00. The sharp decline in energy prices also…

IC – Asia Fundamental Forecast | 28 July 2026

What happened in the U.S. session?

During the U.S. session overnight, geopolitical developments dominated global markets, with reports that the United States and Iran paused military strikes and resumed diplomatic engagement, significantly reducing fears of an immediate disruption to oil supplies through the Strait of Hormuz. As a result, WTI and Brent crude oil prices fell sharply by around 5–8%, reversing much of last week’s geopolitical risk premium. The decline in energy prices improved overall market risk sentiment, lifting equity futures and reducing demand for traditional safe-haven assets. Meanwhile, the U.S. dollar traded slightly weaker against most major currencies as investors…

It is one thing to have the backing of other members in the region but a whole other thing to expect Iran to accept this proposal. Here are the some of the details outlined by the source:

• Iran would not exercise sole control of Strait of Hormuz
• It will be a joint regional mechanism to manage the strait with voluntary fees
• The proposal structure is one based on the Straif of Malacca, where those who use the waterway voluntarily contribute to fund navigation, environmental protection, search and rescue

Well, just on the first point itself I think the proposal would be dead in the water. I can't imagine Iran accepting these conditions without any give, that especially with the renewed conflict with the US again. As a reminder, the US naval…

There aren't any major expiries to take note of on the day, with the full list seen below.

The market mood as we look towards European trading later is more defensive with all eyes on the rout in tech shares. It is a bloodbath in Asia and while European indices may not be as tech heavy in focus, that will only serve to put all the attention on US stocks later in the day.

S&P 500 futures are already down 0.3% with Nasdaq futures down 1.0% as the AI jitters look to permeate. And all this is setting the stage for a more nervous next few days, with big tech earnings on the agenda. As a reminder, Meta, Microsoft, Amazon, and Apple are among the feature names on the earnings calendar this week. So, that will be the make or break for the overall…

While renewed tensions in the Middle East continue to influence investor sentiment, gold is also facing headwinds from elevated US Treasury yields, a resilient US dollar and uncertainty surrounding the Federal Reserve’s next policy decision. 

Unlike previous geopolitical crises, military developments are no longer a major factor driving the precious metal. Instead, gold traders must assess how geopolitical events could influence inflation, interest-rate expectations and the US dollar—all of which ultimately shape gold’s direction.

With President Donald Trump delaying a major military escalation against Iran and the Federal Reserve set to announce its latest monetary policy decision on Wednesday, the precious metal could face a volatile week.

• Japan June core CPI +2.7% y/y
• Prior +2.7%
• Japan June core-core CPI +2.0% y/y
• Prior +2.1%

Just be wary though that in the case of the BOJ data set here, the core CPI estimate still includes energy but excludes fresh food and institutional factors. Meanwhile, the core-core CPI estimate also excludes energy from the equation. As such, the core-core CPI estimate is the more crucial one as it provides a better underlying picture of the inflation outlook.

Taking that into consideration, core prices continuing to stay high is no surprise especially after the surge back up in March and April. For some context, the core CPI estimate fell from a peak of 3.0% in August last year to 2.2% in February this year. That before climbing back up to 2.8% in April…

It's an ugly day for Asian equities to say the least as tech shares, chipmakers and semiconductors especially, are being taken to the cleaners. South Korea's benchmark KOSPI index is the standout, being down roughly 10% on the day. What a beating.

The drop there continues the fall from mid-June with the index down some 35% from the highs this year. That being said, even with the drop today we're only seeing it fall to the lowest since mid-April. And in the context of this year, the index is still well up by over 40% year-to-date. So, that speaks a lot to the breathtaking rally - mostly since March.

All that being said, there is quite a bit to digest from the chart above and the latest price action.

The drop in the past two weeks now confirms…

US treasury sells $16 billion of two-year notes at a high yield of 4.315%

• High yield 4.315%
• WI level at the time of the auction 4.320%
• Tail -0.5 basis points vs average of 0.1 bps
• Bid to cover 2.66X vs average of 2.63X
• Directs 34.05% versus average of 29.2%
• Indirects 56.59% versus average of 58.2%
• Dealers 9.36% versus average of 12.6%

AUCTION GRADE: B+

Solid auction with a negative tail, directs higher. Indirect modestly below the average. Dealers are saddled with less than average

• RBA's Bullock: Key question is whether tightening already delivered enough
• Kospi extends decline to 10%
• Japan finance minister: Mon pol has moved to world of interest rates
• South Korea June consumer sentiment 106.8 vs 106.6 prior
• Nucor beats estimates, but shares shrug it off
• FOMC preview: Realized volatility to come

Markets:

• Kospi -10.2%
• Nikkei 225 -4.2%
• S&P 500 futures -0.2%
• WTI crude oil down $1.36
• Gold down $25 to $4050

The FX market is largely unchanged after a disappointing day on Monday. The tone coming in was sombre after the optimism around Hormuz faded from the euro and antipodeans on Monday. Both had started the week strongly but couldn't hold on and finished near the daily lows. That hasn't extended into the new day as the euro bounced 12…

Not even the Governor knows what's coming next. That points to a healthy debate.

More comments:

• If board thinks inflation is not coming down, will have some difficult decisions to make
• Decision will depend on whether the board thinks policy is restricitve 

AUD was last at 0.6983 and doesn't seem bothered by today's comments.