Global Economy & Markets, Weekly Roundup 07/07/26
Central bankers in Sintra have modestly pushed back against expectations of a dovish pivot, with market attention now shifting toward the upcoming Q2 corporate earnings season
Global equity markets posted meaningful gains in the past week, with the MSCI ACWI at +1.9% wow due to optimism for strong corporate results in Q2 and a substantial improvement in the naval flows of major commodities through the Strait of Hormuz.
With a group of seven major OPEC+ producers deciding on July 5th to hike output quotas for August, the Brent futures contract price for closest delivery (August 2026) was roughly unchanged on July 6th, continuing to hover however at $72/barrel, the lowest level in 4 months (just prior to the war in Iran).
Attention will turn to the corporate earnings season for Q2:2026, which kicks off in earnest in the next week. According to analysts’ estimates, S&P500 earnings growth is expected to remain solid, at +24% yoy, from +29% yoy in Q1:2026. That estimate constitutes a significant upward revision from +19% in the start of the quarter under consideration, the most sizable one since mid-2021. For the full year 2026, the annual growth is expected at +26% yoy ($342 per share).
After a choppy few weeks of trading, volatility in the Technology sector remains, with the Korea Composite Stock Price Index (KOSPI), a proxy of the global technology and manufacturing trade, declining by -3.8% wow, though has increased by +92% year-to-date.
Commentary from the heads of major central Banks in the ECB’s annual forum in Sintra, Portugal, was overall viewed as somewhat leaning to the hawkish side. A common theme was a move away from forward guidance, leaving financial markets to form their expectations on monetary policy with higher degrees of freedom and based mainly on economic data.
The Chair of the Federal Reserve Warsh acknowledged that upside inflation risks have eased since the most recent meeting of the Fed, given lower international oil prices. Nevertheless, Warsh reiterated the Fed’s outmost resolve in bringing down inflation back to the 2% price stability target, while pushing back against any speculation that the Fed could be complacent towards any overshooting of the target (see “Quote of the Week”).
Warsh’s moderately hawkish comments were offset by weaker-than-expected US labor market data for June. Non-farm payrolls increased by +57k on net in June, below consensus for +114k. Investors pushed back their expectations regarding the timing of a rate hike (current target range of FFR: 3.50% - 3.75%), by one or two meetings towards December 2026.
As the ECB has long favored a data-dependent and meeting-by-meeting approach, Lagarde underpinned the move away from rigid forward guidance. At the same time, as was also the case with Warsh, Lagarde avoided signaling that the recent moderation in international energy commodity prices had altered the ECB’s policy outlook in a dovish direction.
The curve of investors’ respective rate expectations was little changed, with the effect from perceived points of hawkishness by Lagarde’s speech being offset by lower-than-anticipated inflation.
Indeed, the headline euro area CPI increased by +2.8% yoy from +3.2% yoy in May and with the Energy component posting signs of a quick reaction to the recent easing of international prices of energy commodities.
Global equity markets posted meaningful gains in the past week, with the MSCI ACWI at +1.9% wow due to optimism for strong corporate results in Q2 and a substantial improvement in the naval flows of major commodities through the Strait of Hormuz.
With a group of seven major OPEC+ producers deciding on July 5th to hike output quotas for August, the Brent futures contract price for closest delivery (August 2026) was roughly unchanged on July 6th, continuing to hover however at $72/barrel, the lowest level in 4 months (just prior to the war in Iran).
Attention will turn to the corporate earnings season for Q2:2026, which kicks off in earnest in the next week. According to analysts’ estimates, S&P500 earnings growth is expected to remain solid, at +24% yoy, from +29% yoy in Q1:2026. That estimate constitutes a significant upward revision from +19% in the start of the quarter under consideration, the most sizable one since mid-2021. For the full year 2026, the annual growth is expected at +26% yoy ($342 per share).
After a choppy few weeks of trading, volatility in the Technology sector remains, with the Korea Composite Stock Price Index (KOSPI), a proxy of the global technology and manufacturing trade, declining by -3.8% wow, though has increased by +92% year-to-date.
Commentary from the heads of major central Banks in the ECB’s annual forum in Sintra, Portugal, was overall viewed as somewhat leaning to the hawkish side. A common theme was a move away from forward guidance, leaving financial markets to form their expectations on monetary policy with higher degrees of freedom and based mainly on economic data.
The Chair of the Federal Reserve Warsh acknowledged that upside inflation risks have eased since the most recent meeting of the Fed, given lower international oil prices. Nevertheless, Warsh reiterated the Fed’s outmost resolve in bringing down inflation back to the 2% price stability target, while pushing back against any speculation that the Fed could be complacent towards any overshooting of the target (see “Quote of the Week”).
Warsh’s moderately hawkish comments were offset by weaker-than-expected US labor market data for June. Non-farm payrolls increased by +57k on net in June, below consensus for +114k. Investors pushed back their expectations regarding the timing of a rate hike (current target range of FFR: 3.50% - 3.75%), by one or two meetings towards December 2026.
As the ECB has long favored a data-dependent and meeting-by-meeting approach, Lagarde underpinned the move away from rigid forward guidance. At the same time, as was also the case with Warsh, Lagarde avoided signaling that the recent moderation in international energy commodity prices had altered the ECB’s policy outlook in a dovish direction.
The curve of investors’ respective rate expectations was little changed, with the effect from perceived points of hawkishness by Lagarde’s speech being offset by lower-than-anticipated inflation.
Indeed, the headline euro area CPI increased by +2.8% yoy from +3.2% yoy in May and with the Energy component posting signs of a quick reaction to the recent easing of international prices of energy commodities.