Sharp rise in OpenAI's valuation helps tech stocks despite AMD's costs rise

EU mid-market update: No news is good news; Markets creep higher as earnings drives on; Sharp rise in OpenAI's valuation helps tech stocks despite AMD's costs rise.

Notes/observations

- European indices and Asian equities trade higher, led by Japan and a third day of gains in Hong Kong. Economic data was uneventful, despite miss in German factory orders and weakest UK construction PMI since 2010. Key earnings dropped from: Commerzbank, Bayer, Siemens Energy, Novo Nordisk and ABN Amro.

- US futures bounce after red session yesterday. Payroll driven selloff looks like market excuse to justify correction from elevated valuations.

- Gold remains rangebound since early May.

- M&A continues to be elevated.

- Asia closed higher with ASX200 outperforming +0.8%. EU indices +0.2-0.5%. US futures +0.2-0.4%. Gold -0.5%, DXY 0.0%; Commodity: Brent +1.5%, WTI +1.6%; Crypto: BTC -0.6%, ETH -1.0%.

Asia

- New Zealand Q2 Unemployment Rate: 5.2% v 5.3%e.

- Japan Jun Labor Cash Earnings Y/Y: 2.5% v 3.0%e; Real Cash Earnings Y/Y: -1.3% v -0.7%e.

- India Central Bank (RBI) left Repurchase Rate unchanged at 5.50% (as expected) for its 1st pause under the current easing cycle. Maintained its neutral policy stance. Staff Projections cut FY26 CPI from 3.7% to 3.1%.

- Japan LDP Politician Kono Taro: Necessary to raise rates to strengthen the Yen [made similar comments in Jul 2024].

Global conflict/tensions

- Ukraine Pres Zelenskiy said he held constructive talks with Pres Trump on ending the war ahead of the ceasefire deadline (**Note: US envoy Witkoff in Moscow for a meeting with the Russian leadership).

- Russia said to consider offering a Ukraine air truce as a concession to Trump in effort to prevent secondary tariffs being implemented on Russian energy customers.

Europe

- ECB's Holzmann (outgoing member; hawk/dissenter, Austria): Reiterates no reason to cut rates again.

- National Institute of Economic and Social Research (NIESR) noted that Chancellor Reeves must find £50bn’ in tax rises or spending cuts in budget.

- NIESR [think tank] also expected BOE to cut the key rate on Thursday, then once more in 2025.

- Times Shadow MPC voted 7-2 that BOE should cut Base rate by 25bps to 4.00% at its Aug meeting.

Americas

- Pres Trump: The Fed Gov decision will be made by the end of the week.

- Fed 2025 Jackson Hole symposium will take place between Aug 21st-23rd.

Energy

- Weekly API Crude Oil Inventories: -4.2M v +1.5M prior.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.04% at 541.60, FTSE +0.22% at 9,163.25, DAX +0.12% at 23,886.00, CAC-40 +0.26% at 7,640.77, IBEX-35 +0.16% at 14,425.73, FTSE MIB +0.34% at 40,884.00, SMI -0.55% at 11,782.76, S&P 500 Futures +0.31%].

Market Focal Points/Key Themes: European indices open higher across the boards and remained upbeat through the early part of the session; German government preparing to launch investment fund seen helping risk appetite; sectors leading to the upside include real estate and materials; lagging sectors include health care and telecom; earnings expected in the upcoming Americas session include McDonald’s, Uber, Walt Disney and Qiagen.

Equities

- Consumer discretionary: Zalando [ZAL.DE] -4.5% (earnings), Beiersdorf [BEI.DE] -9.0% (earnings).

- Consumer staples: Ahold Delhaize [AD.NL] +1.0% (earnings).

- Financials: Commerzbank [CBK.DE] -1.0% (earnings; buyback), Banca Monte Paschi de Siena [BMPS.IT] +3.0% (earnings; Mediobanca offer again confirmed) - Healthcare: Novo Nordisk [NOVOB.DK] -1.0% (final earnings; cost cuts), Bayer [BAYN.DE] -4.5% (final earnings) - Industrials: Siemens Energy [ENR.DE] -1.5% (earnings; outlook; notes further US manufacturing capacity expansions are under review, with decisions hinging on sustained demand and rising construction costs due to inflation), Rheinmetall [RHM.DE] +1.0% (Germany reportedly readies €100B fund Deutschlandfonds in invest in strategic assets to help secure strategic sectors such as defense, energy and critical raw materials) - Technology: ASML [ASML.NL] +0.5% (OpenAI valuation increased; AMD earnings).

Speakers

- ECB noted that rising Chinese competition put pressure on euro area employment in key sectors.

- Germany govt said to prepare €100B fund Deutschlandfonds in invest in strategic assets to help secure strategic sectors such as defense, energy and critical raw materials.

- Poland Pres Nawrocki stated that he wa against adopting Euro and raising retirement age.

- India Central Bank (RBI) Gov Malhotra post rate decision press conference noted was difficult to predict impact of global uncertainty. Did not have sufficient data for any GDP revision.

Currencies/fixed income

- FX markets continued to consolidate but the USD continued to face headwinds. Dealers noted that the greenback remained under pressure after weaker-than-expected US services data on Tuesday. Recent soft US data has fueled expectations that the Fed could resume interest-rate cuts in September.

- EUR/USD holding below the 1.16 level as EU data also continued to be weak. ECB noted that rising Chinese competition put pressure on euro area employment in key sectors.

- GBP/USD just under the 1.33 level with focus on Thurs BOE rate decision. The MPC expected to cut the Bank Rate by another 25bps and likely to keep that pace intact in coming decisions.

- USD/JPY at 147.65 by mid-session.

- 10-year German Bund yield at 2.64% and 10-year Gilt yield at 4.54%. 10-year Treasury yield: 4.23%.

Economic data

- (DE) Germany Jun Factory Orders M/M: -1.0% v ++1.1%e; Y/Y: 0.8% v 2.1%e.

- (HU) Hungary Jun Industrial Production M/M: -1.2% v +0.8%e; Y/Y: -4.9% v -3.0%e.

- (HU) Hungary Jun Retail Sales Y/Y: 3.0% v 3.4%e.

- (FR) France Preliminary Q2 Private Sector Payrolls Q/Q: 0.0% v -0.1% prior.

- (AT) Austria July Wholesale Price Index M/M: 0.2% v 0.6% prior; Y/Y: -0.1% v +0.2% prior.

- (CZ) Czech Jun Industrial Output Y/Y: 3.3% v 2.9%e.

- (CZ) Czech Jun Trade Balance (CZK): 26.3B v 17.8Be.

- (DE) Germany July Construction PMI: 46.3 v 44.8 prior.

- (IT) Italy Jun Industrial Production M/M: +0.2% v -0.2%e; Y/Y: -0.9% v -1.0% prior; Industrial Production NSA (unadj) Y/Y: -0.9% v -3.9% prior.

- (TW) Taiwan July CPI Y/Y: 1.5% v 1.4%e; CPI Core Y/Y: 1.7% v 1.5%e; PPI Y/Y: -6.4% v -5.4% prior.

- (UK) July Construction PMI: 44.3 v 48.8e (7th month of contraction).

- (EU) Euro Zone Jun Retail Sales M/M: % v 0.3%e; Y/Y: % v 2.6%e.

Fixed income issuance

- (DK) Denmark sold total DKK2.36B in 2027 and 2035 DGB Bonds.

- (NO) Norway sold total NOK3.0B vs. NOK3.0B indicated in 2030 and 2035 Bonds.

- (SE) Sweden sold total SEK17.5B vs. SEK17.5B indicated in 3-month and 6-month bills.

Looking ahead

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (DE) Germany to sell combined €1.5B in 2038 and 2042 Bunds.

- 05:30 (PL) Poland to sell bonds.

- 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays).

- 06:00 (PT) Portugal Q2 Unemployment Rate: % v 6.6% prior.

- 06:00 (RU) Russia to sell OFZ Bonds.

- 06:00 (EU) European Union to sell combined €3.5B indicated in 3-month, 6-month and 12-month bills.

- 07:00 (US) MBA Mortgage Applications w/e Aug 1st: No est v -3.8% prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 09:30 (CA) Canada July Services PMI: No est v 44.3 prior; Composite PMI: No est v 44.0 prior.

- 10:30 (US) Weekly DOE Oil Inventories.

- 11:30 (US) Treasury to sell 17-Week Bills.

- 12:00 (CA) Canada to sell 5 Year Bonds.

- 13:00 (US) Treasury to sell 10-Year Notes.

- 14:00 (BR) Brazil July Monthly Trade Balance: $5.7Be v $5.9B prior; Exports: $31.8Be v $26.0 prior; Imports: $26.0Be v $23.3B prior.

- 14:00 (US) Fed’s Cook.

- 19:00 (KR) South Korea Jun Current Account Balance: No est v $10.1B prior; Balance of Goods (BOP): No est v $10.7B prior.

- 21:30 (AU) Australia Jun Trade Balance (A$): 3.0Be v 2.2B prior; Exports M/M: No est v -2.7% prior; Imports M/M: No est v 3.8% prior.

- 22:00 (PH) Philippines Q2 GDP Q/Q: 1.3%e v 1.2% prior; Y/Y: 5.5%e v 5.4% prior.

- 22:30 (HK) Hong Kong to sell CNY1.0B in 10-year Bonds.

- 23:00 (ID) Indonesia July Foreign Reserves: No est v $152.6B prior.

- 23:00 (NZ) New Zealand Q3 2-year Inflation Expectation Survey: No est v 2.3% prior.

- 23:30 (JP) Japan to sell 6-Month Bills.

- 23:35 (JP) Japan to sell 30-year JGB Bonds.

- 23:45 (TH) Thailand July Consumer Confidence: No est v 52.7 prior; Economic Confidence: No est v 46.7 prior.