This week, attention turned to comments from President Donald Trump, who threatened to reinstate restrictions targeting Iranian oil exports and proposed imposing a 20% toll on vessels transiting the Strait of Hormuz. The remarks raised concerns over potential supply disruptions and were enough to send brent crude oil futures up to $87 dollars per barrel. Despite the rally in energy prices, equity markets remained resilient, supported by a softer-than-expected US inflation report.
June CPI data showed headline inflation declined by 0.4% for the month, while core CPI remained broadly unchanged. The latest US CPI reading benefited from lower energy prices, reflecting the temporary easing in geopolitical tensions following the ceasefire. With the ceasefire now having broken down, upward pressure on energy prices could re-emerge, creating a risk that inflationary pressures prove more persistent than previously expected. The data ultimately boosted investor sentiment, helping major US equity indices finish modestly higher. Even so, the figures did little to shift expectations for the Federal Reserve’s September meeting, with markets continuing to believe policymakers will need further evidence that underlying price pressures are easing before adjusting interest rates.
Over in China, June trade figures showed the country’s trade surplus widened further from the previous month, underpinned by a strong performance in exports. Overseas shipments accelerated to 20.8% year-on-year, up from 13.8% in May, while imports also gathered pace. The stronger-than-expected trade data has prompted investors to reassess the outlook for China’s economy. A larger trade surplus is generally viewed as a sign of resilient external demand, leading markets to become more confident that economic growth will remain more robust than previously feared. As a result, expectations of GDP growth slipping below 1.0% in 2026 have eased, with current market sentiment reflecting a more constructive view of China’s growth prospects.
Second-quarter earnings from the major US banks have exceeded expectations, with institutions including JPMorgan, Wells Fargo and Bank of America delivering stronger-than-forecast results. Performance was driven by a sharp rebound in investment banking activity, as merger and acquisition advisory fees, IPO volumes and lending all strengthened. In particular, dealmaking revenues reached their highest levels since 2021.
A significant contributor to this resurgence has been the rapid expansion of artificial intelligence, which continues to fuel capital raising through equity offerings, bond issuance and new stock market listings. Investors remain optimistic that this momentum may be able to be sustained going into Q3, supported by healthy business activity, improving corporate confidence and continued demand for financing.
Still to come this week, Chinese retail sales, industrial production and GDP data. US PPI and retail sales. UK GDP and industrial production. Q2 earnings also remains in focus with ASML, TSMC and Netflix due to report.
Nicola Tune, Portfolio Specialist
