To The Moon

With a temporary de-escalation of hostilities in the Middle East, oil prices fell sharply on Monday, triggering a rebound in stock and bond markets and providing a positive start to a week packed with corporate earnings reports and multiple interest rate decisions.

As of writing, Dow futures are up 1.05%, S&P 500 futures are up 0.82%, and Nasdaq futures are up 1.31%. Last week, the escalation of the Middle East conflict pushed oil prices above $100 per barrel, sparking global market concerns. As signs of a de-escalation emerge, global stock markets are experiencing a "relief rally" on Monday.

In European markets, the pan-European Stoxx 600 index rose 0.7%. Luxury goods stocks were up as investors awaited earnings results from LVMH later on Monday. Benefiting from a return of risk appetite, economically sensitive retail and travel stocks rose over 2%. However, declines in energy stocks capped the overall market gains. The MSCI Asia Pacific Index (ex-Japan) rose approximately 0.3%.

Tech Giants' Earnings Reports on the Horizon

Despite early gains in shares of the "Magnificent Seven" members, the market finds it difficult to predict the market's reaction to this week's super-cap tech earnings reports. As capital expenditures increasingly consume the cash flow generated by these companies, the bar for investor satisfaction is constantly rising. Since the dawn of the AI wave, these tech giants have been the core driving force behind the US stock market rally, but the market is now re-evaluating the rationality of their investment scale.

"There is a complex relationship between earnings releases and market performance," said Daniel Murray, Deputy Chief Investment Officer at EFG Asset Management. "If results are very good but the market reaction is muted, that will provide important information about the current market environment and investor sentiment."

Overall, this earnings season has started strongly. According to Bloomberg Intelligence data, among the 135 S&P 500 companies that have reported results so far, over 86% have exceeded profit expectations. If this trend continues, this earnings season could be the best for corporate earnings since the second quarter of 2021.

At the same time, questions about the sustainability of large tech companies' escalating AI investments have been a significant source of recent market volatility. Monday's gains did not fully dispel market caution, as the week brings the busiest period of the earnings season, with major tech companies like Amazon, Meta Platforms, and Microsoft reporting, bringing AI capital expenditure issues back into focus.

US-Iran Ceasefire Boosts Oil Prices

After the US paused military strikes against Iran for the third consecutive night, ending nearly two weeks of operations, market risk sentiment improved. Brent crude oil prices fell by about 9% to $88 per barrel. Iran stated on Sunday that it would also halt its attacks as long as the US stops military action. It was reported that the US military was previously concerned about dwindling ammunition stocks.

Traders are finding relief in the oil price retreat. Earlier this month, Brent crude had risen by more than a third, raising concerns that central banks might need to tighten monetary policy further to control inflationary pressures. "Today's oil price decline is positive for both stocks and bonds, but the effect may be limited in duration," said Skylar Montgomery Koning, macro strategist at Bloomberg. "Especially with shipping through the Strait of Hormuz not yet restored, it's difficult to remain persistently bearish on oil."

Analysts at ANZ Bank noted that despite the pause in attacks by the US and Iran, oil prices are still supported by declining inventories and pressure on Saudi Arabia's East-West pipeline. "The oil market still relies on increasingly thin buffers that are absorbing the impact of supply disruptions from the Middle East," analysts stated.

Global Bond Market Rally

The drop in oil prices has also led to a slight reduction in market expectations for future Fed rate hikes. Global bond yields fell broadly. The US 10-year Treasury yield dropped 4 basis points to 4.63%. The 2-year Treasury yield fell 3.7 basis points to 4.292%, and the 30-year Treasury yield declined 4.4 basis points to 5.117%. Eurozone government bond yields opened lower, following the move in US Treasuries. According to LSEG data, the German 10-year Bund yield fell 3.5 basis points to 3.134%. In terms of eurozone government bond supply, Belgium is set to issue approximately €2.4 billion to €2.8 billion in bonds maturing in 2031, 2033, and 2035 on Monday.

Fed Rate Decision Takes Center Stage

The US Dollar Index fell about 0.2%, with the Swiss Franc being the strongest performer among major currencies against the dollar. Gold prices rose, briefly surpassing $4,100. "The easing of geopolitical tensions has reduced market concerns about inflation and could also alleviate pressure on the Fed to further tighten policy, providing short-term support for gold ahead of this week's closely watched Fed meeting," said Soojin Kim, an analyst at MUFG.

Another major event is the Federal Reserve's interest rate decision on Wednesday. Current market pricing suggests about a one-third probability of a rate hike this week, but most analysts believe Fed Chair Kevin Warsh is unlikely to support such a move. "I expect this to be a highly volatile week, with the Fed decision, tech company earnings, and a lot of European inflation data," said Andrea Gabellone, an analyst at KBC Securities. "Furthermore, the situation in Iran remains very fragile. The president currently says 'all options remain on the table,' so it's difficult for the market to fully re-embrace risk assets."

"A rate hike this week would send a strong signal to the market that Warsh wants to bolster the Fed's anti-inflation credibility early in his tenure," wrote Lee Hardman, senior currency analyst at MUFG, in a note. "However, we are not convinced he wants to deliver on his tough inflation talk through actual policy action just yet." He added, "If inflation risks do not abate this summer, the probability of a September rate hike will increase."

Don't Forget the Data

The Bank of England will announce its policy decision on Thursday, and the Bank of Japan will announce its rate decision on Friday. Markets expect both central banks to keep rates unchanged but will remain cautious about future inflation risks.

This week, the market will also focus on a series of important economic data releases. In the US, the advance estimate for Q2 GDP is expected to show the economy rebounding from its sluggish start to the year, with an annualized growth rate forecast of 1.5%. Additionally, the US will release: June PCE price index; personal income and spending data; initial jobless claims; Q2 employment cost index; and July University of Michigan consumer sentiment index.

AI Titans Pour Millions into US Elections! A Proxy War is Underway

Some of the titans of the AI and tech world are using the midterm elections to wage a proxy war over the industry's future. Entities including Anthropic, Meta, and OpenAI President Greg Brockman are linked to a network of outside groups and super PACs aimed at shaping the power structure of the next Congress and some state legislatures. These groups have already spent over $65 million and still have tens of millions of dollars in reserve. Because so-called "dark money" groups are not required to publicly disclose their spending regularly, the final total may take some time to become clear.

The Trump administration has generally taken a friendly stance towards AI regulation, but tensions have escalated after the White House delayed the release of the latest frontier models from Anthropic and OpenAI. Both companies are also closely watching what actions, if any, the Trump administration and lawmakers will ultimately take against Chinese open-weight AI models, such as Moonshot AI's popular Kimi K3. As more people use more advanced models than ever before, AI is facing a critical moment. Meanwhile, the industry's public approval rating has declined significantly. Some states are even considering data center moratoriums, like the ban recently signed into law by New York Governor Kathy Hochul.

Capital Piles into OpenAI Investment! SoftBank's $40 Billion Bridge Loan 'Crazy' Snapped Up by 21 Institutions

According to sources familiar with the matter, the $40 billion bridge loan arranged by SoftBank Group (SFTBY.US) to invest in US AI giant OpenAI has attracted a new group of 21 lending institutions during the wider syndication phase. The sources said the new batch of financial institutions brings the total number of institutions participating in the financing to over 70 billion in loan commitments. Among them, First Abu Dhabi Bank, Singapore's GIC, and Standard Chartered each committed close to $1 billion in loans. The remaining loan amounts were allocated to banks from Europe, Japan, and Taiwan. The sources noted that because some lending institutions participated through multiple subsidiaries, the count of new lenders was calculated based on the parent company level of each financial institution. The sources added that the remaining $33 billion of the bridge loan is still held by the underwriting banks and senior lenders but may be further syndicated in the future. For large financing transactions, the initial participating institutions typically distribute some of the loan amount to a wider range of financial institutions.

'Big Short' Investor Strikes Again! Increases Short Bets on Micron and Nvidia

Prominent 'Big Short' investor Michael Burry disclosed his latest portfolio moves on his Substack platform on Friday, increasing his bearish bets on semiconductor-related names. The move reflects his continued skepticism towards the semiconductor industry. Burry, the inspiration for the protagonist in the film 'The Big Short' who accurately predicted the 2008 US subprime mortgage crisis, stated on Friday that he increased his short position in Micron Technology (MU.US) at $933.86 and added to his short position in Nvidia (NVDA.US) at $210.28. He also mentioned that he still holds a "significant" position in Nvidia put options and added that he believes most of Nvidia's current and future demand is not driven by end customers. Citing the Bank for International Settlements (BIS) 2026 annual report, Burry noted that a large portion of demand is financed off-balance-sheet and undisclosed, with future revenue "largely realized through circular financing arrangements." He also stated that he remains bearish on the entire tech sector and continues to hold put options on the Invesco QQQ Trust, which tracks the Nasdaq 100 index.

Key Stocks in Focus

ChangXin Memory Technologies (CXMT) surged over 466% on its debut on the Shanghai Stock Exchange, driving a broad rally in memory chip stocks. This upward momentum carried over to US memory companies: SK Hynix rose 4.7%, SanDisk rose 3.6%, and Micron Technology rose 2.5%.

Following the US-Iran agreement to pause mutual attacks, oil prices fell, dragging the energy sector down. Chevron and Exxon Mobil fell 2.7% and 3.2%, respectively; APA Corporation, Devon Energy, and Diamondback Energy all fell by around 4%.

Forte Biosciences shares surged over 39% after news that Dutch biopharmaceutical company Argenx will acquire the company for $2.2 billion in cash, equivalent to $77 per share. The deal is expected to close in the third quarter and represents a 40% premium over the stock's closing price of $54.78 on Friday. Argenx shares were slightly lower in pre-market trading.

Baker Hughes shares rose nearly 2.2% after the company reported Q2 revenue and earnings that beat market expectations. CEO Lorenzo Simonelli stated in the release that despite uncertainty in the Middle East, industry fundamentals are generally improving, and the company's full-year results are expected to fall within the midpoint of its official guidance range.

Semiconductor packaging and testing company Amkor Technology rose over 2.4% in pre-market trading ahead of its quarterly report after the closing bell on Monday.

D-Wave Quantum announced a partnership with AT&T on Monday, planning to use its quantum annealing computers to help the telecom giant develop its AI business. D-Wave shares surged over 7%. Other quantum concept stocks also rose in sympathy: IonQ gained nearly 4.5%, and Rigetti Computing rose 3.8%.