Newsquawk European Market Wrap - 27th July 2026

European equities end the day firmer as oil prices and yields fell after the US halted strikes on Iran. Yemeni Houthis claimed responsibility for the drones that targeted Saudi oil infrastructure, a statement said. China has started mass production of domestically developed DUV lithography equipment, The Information reports SNB expects to keep the interest rate at zero until the end of 2027, Bloomberg reports, citing sources. EQUITIES European Equities began the week firmer (STOXX 600 +0.6%) as oil prices and yields fell after the US halted strikes on Iran. The DAX outperformed as SAP extended post-earnings gains, while Spain’s IBEX was supported by strength in Retail and Travel. The FTSE 100 and OMX Copenhagen lagged as Shipping and Oil majors came under pressure. Sectors traded broadly higher, with the exception of Energy and Utilities. Moves were driven by geopolitical de-escalation, with Retail and Travel & Leisure leading, while Tech also outperformed following CXMT’s surge on its Shanghai debut.Movers – ASML shares fell some 4% following The Information reporting that China has started mass production of domestically developed DUV lithography equipment, marking a further advance for the country's domestic semiconductor manufacturing industry. US equity futures were firmer on easing Middle East tensions (ES +0.9%, NQ +1.4%, RTY +1.2%), with focus on upcoming earnings from Microsoft, Meta, Qualcomm, Amazon and Apple, set to test the resilience of the AI trade aftermarket. FX G10s started the week on a positive footing vs. the Buck, though most gains were erased as USD strength picked up throughout the session, with DXY near enough flat. USD was initially softer alongside weaker Energy benchmarks (Brent Oct’26 -5%) after the US and Iran ceased fire over the weekend. To briefly recap, the US paused strikes, and Iran refrained from retaliation; US President Trump said all options remain available, while Oman-Iran discussions on maritime navigation reportedly made some progress. DXY rose alongside crude rebounding off lows, despite a lack of headlines. Another factor likely driving the moves today is positioning into the Fed meeting later in the week, and, given the above developments, could be less hawkish than previously expected with markets’ Fed tightening bets abating by a couple of bps overnight; that being said, this could again reverse given the fluid geopolitical situation. DXY was within a 101.11-44 range, set to hand over to NY at highs. EUR held onto gains made against the earlier underperformance in the Buck, the pair bouncing above the 1.14 mark overnight to a 1.1418 peak, before reversing towards 1.1380. Little bloc-specific newsflow to digest, with Ifo firming in line with expectations ahead of Growth/Inflation on Thursday/Friday, respectively. Speakers today included ECB’s Kazimir, who reiterated a hawkish stance with a high bar to avoid a September hike. The week's UK calendar is highlighted by the BoE meeting on Thursday, where policymakers are likely to opt for another pause. The vote split is the one to watch, as while consensus expects a 7-2 split, a more hawkish split cannot be ruled out. Cable was initially firmer, though is now set to complete the domestic session flat. However, the EUR cross (EUR/GBP +0.2%) saw Sterling underperformance throughout the session, attempting to claw back some recent losses, with JPMorgan FX strategy suggesting its GBP bias was neutral, previously expecting outperformance. Pressure seen in the CHF this afternoon on a Bloomberg source report that the SNB intends to keep rates at the ZLB until end-2027, a report that essentially pushed back on the upside seen in global rate expectations since the Middle East conflict began, and given the resurgence in the last few weeks as tensions flared again and Brent surpassed USD 100/bbl once more. Sufficient to lift EUR/CHF from 0.9286 to 0.9306, before fading; potentially as participants digested the full report, which added that while on hold until end-2027, the SNB would then probably start to hike. RBI likely sold USD via state run banks to lift INR past 96, according to traders. FIXED INCOME A modestly bullish session for fixed income, given the pullback in the energy space as Brent moved below the USD 85.00/bbl handle. Notably, the pullback in yields is not quite as pronounced as the energy move would potentially suggest, possibly suggesting that the hawkish re-pricing we have seen in recent days for major central banks is relatively entrenched in the market's view. At best, USTs got to a 108-22 peak, firmer by around 10 ticks. Matching the best from the 22nd, yet to approach the 109-00 high from the 21st and then last week’s 109-08+ peak. Ahead, 2yr and 5yr auctions before a 7yr on Tuesday and then the Fed on Wednesday. Elsewhere, Sunday marked 100 days until the Midterms. Currently, the base case is for the Democrats to take the House while the Republicans will hold the Senate, exacerbating the “lame duck” status of President Trump’s final two years. Bunds in-fitting with the above across the session. No move to the morning’s Ifo series, which is likely subject to similar timing caveats as the PMIs, or ECB’s Kazimir who stuck to his hawkish tone. Slightly more upside is seen in Bunds vs USTs, perhaps with the latter looking to supply and the Fed on Wednesday, or as the marked downside in European gas benchmarks weighs on EGB yields. Bunds got a tick above 125.00, but failed to test 125.10 from last week. Finally, Gilts gapped higher at the open given the above and then extended to an 87.24 peak with gains in excess of 50 ticks; though, the benchmark has given up around half of that since. Upside a function of the usual energy-related out/underperformance. Additionally, the Huffington Post suggested that UK PM Burnham has hinted that he will make it more difficult for people to claim benefits, a point that may be assisting Gilts somewhat as well. Treasury Block Trades: 08:46ET/13:46BST: 5.0k 2-Year T-Note Futures (ZTU6) at 102-245. American Airlines (AA) files to sell corporate issuance; USD 1.3bln in a two-part offering. AT&T (T) is raising at least EUR 2bln through four EUR-denominated bonds with maturities of 4yr, 8yr, 12yr, 19yr, alongside a 26-year GBP tranche, with pricing expected later today, Bloomberg reported. COMMODITIES Crude - Crude was sharply lower following the US pause in strikes on Iran, though losses were trimmed into US trade. Brent Oct’26 fell over 7% at worst to USD 84.65/bbl (vs high USD 88.95/bbl), while WTI Sep’26 dropped to a USD 82.12/bbl trough (vs peak USD 86.20/bbl). Natural Gas – Dutch TTF slumped over 8% at one point, briefly dipping below EUR 58/MWh before recovering modestly towards EUR 59.00/MWh. Precious Metals – Firmer intraday but off best levels as energy pared losses. Spot gold traded towards the lower end of a USD 4,075.69–4,116.19/oz range (vs Friday’s USD 4,052/oz close). Spot silver similarly sat towards the bottom of a USD 58.63–60.09/oz range (vs Friday’s USD 58.20/oz low). Base Metals - Posted modest gains but also came off highs as energy recovered. 3M LME copper traded within a narrow USD 13,615.00-13,784.93/t range. Norilsk Nickel H1 copper production was 203k/T, -5%, Tass reported; confirmed 2026 nickel and palladium production forecasts. Kazakhstan cut oil production to 1mln BPD on Sunday, less than half June’s average, owing to the CPC export terminal closure, a source said. CPC’s Black Sea terminal expected to resume oil loadings today following a one week suspension after drone attacks, sources say. Iraqi militias and political parties have received official approvals to establish oil facilities; Iraq has allocated about 1.5mln BPD for domestic consumption, including 300K BPD for the Ministry of Electricity. The reported note that more than a third of Iraq’s oil production revenues since 2011 have gone to militias and political parties. A magnitude 5.5 earthquake struck the Antofagasta region of Chile, according to EMSC. EUROPEAN DATA UK CBI Distributive Trades (Jul) -26 vs. Exp. -45 (Prev. -54). EU Loans to Households YoY (Jun) Y/Y 3% vs. Exp. 3.1% (Prev. 3.1%). EU M3 Money Supply YoY (Jun) Y/Y 3.3% vs. Exp. 3.2% (Prev. 3.2%). EU Loans to Companies YoY (Jun) Y/Y 4.0% (Prev. 4%). German Ifo Expectations (Jul) 86.7 (Prev. 84.1). German Ifo Current Conditions (Jul) 86.5 (Prev. 87.0). German Ifo Business Climate (Jul) 86.6 vs. Exp. 86.1 (Prev. 85.6). Swedish Household Lending Growth YoY (Jun) Y/Y 3.2% (Prev. 3.1%). NOTABLE HEADLINES Volkswagen (VOW3 GY) is reportedly in talks with a China partner regarding a takeover of a Spanish battery plant, according to Reuters. UK PM Burnham will, on July 28th, signal an intent to focus on providing better support for young people to find employment, FT reported. Italy cabinet to meet at 16:30EDT/17:30CET to discuss diesel costs. European Commission is considering watering down a large business levy which was designed to raise funding relating to the next 7yr budget, Politico reported citing sources. Officials said to be considering exempting loss-making companies and raising the revenue threshold to exclude smaller businesses for the "Corporate Resource for Europe" charge. UK PM Burnham hinted he will make it more difficult to claim benefits to bring down the welfare bill, according to Huffington Post. It was separately reported that Burnham said UK must get really serious about cutting welfare. TRADE/TARIFFS Brazil's Finance Minister said seeks to talk with US Treasury Secretary Bessent and show US tariffs are nonsense. Chinese MOFCOM spokesperson called on the US to correct its approach and withdraw unilateral tariff measures under the 301 investigations. China Foreign Ministry said China's countermeasures on EU do not target any one country. CENTRAL BANKS SNB expects to keep the interest rate at zero until the end of 2027, Bloomberg reports, citing sources Indonesia Central Bank Interim Governor said to maintain pro-growth macroprudential policy. ECB’s Kazimir said second round effects are costly to reverse, ECB must act before they are visible; at least one more hike needed as part of measured adjustment to inflation risks. A rate hike will be warranted even if the inflation situation improves somewhat. Should the situation escalate, with the price pressures becoming stronger and more persistent, we will need to tighten more over the next quarters than is currently expected. Incoming data and geopolitical developments would need to be very convincing to do for me not to advocate another hike in September; We didn’t surprise the markets now, we shouldn’t surprise them in September. GEOPOLITICSMIDDLE EAST Iran's Supreme Leader called for Hezbollah to continue armed resistance against Israel until Israeli forces completely withdraw from Lebanon, Tasnim reported. Yemeni Houthis claimed responsibility for the drones that targeted Saudi oil infrastructure, a statement said. Saudi Arabia's Defence Ministry said it intercepted drones from Iraqi territory that attempted to target oil facilities in the Eastern Province and Riyadh regions, Al Hadath reported. Affirmed the Kingdom's legitimate right to defend itself and its capabilities, adding that it reserves the right to respond. Said the terrorist attacks were launched from Iraq by Iran-affiliated terrorist militias. Israeli Channel 12, citing sources said Israeli PM Netanyahu will present Trump with up-to-date intelligence on Iran's progress toward acquiring a nuclear bomb. Netanyahu will express his opposition in Washington to the American demand for withdrawal from southern Lebanon and Syria. Netanyahu will ask Trump not to sell weapons systems and F-35 fighter jets to Türkiye. Ukraine Foreign Minister said Iran's threats are baseless, its regime is directly complicit in Russian aggression against Ukraine; Regime in Tehran is fueling Russia's war. Iran's statements are an attempt to divert attention from Russian terrorism against civilian shipping in the Black Sea. Israel PM Netanyahu is travelling to Washington for a White House meeting with President Trump tomorrow, I24 reporter said. Adds that despite reported tensions, Israel and the US remain closely aligned on the Iran campaign, with security coordination continuing at a high level. Iranian Foreign Ministry spokesperson said some countries in the region are continuing to be involved in the conflict, they need to stop. The conversation between Iran and Oman regarding Hormuz have been positive. Iranian Foreign Ministry spokesperson, in an interview on Sunday, said Iran has no fear of negotiations, but it will not accept negotiations whose goal is to dictate or impose demands. Arab sources report explosions in Saudi Arabia and targeting of the country's oil facilities, reported Fars. Hours ago, the huge Abqaiq oil facility in eastern Saudi Arabia, one of the world's most important oil processing centers, was set on fire in drone and missile attacks, reported Tasnim citing sources and images. UK Government moves to kill two policy ideas that have been floated in recent days: Burnham will not scrap council tax and he will not scrap stamp duty. Kazakhstan Energy Ministry said oil loadings at CPC Black Sea terminal has now resumed; daily oil production has halved after the CPC export terminal closure. reported of explosions heard in Erbil, Iraq, SNN reported. Israeli official said PM Netanyahu’s planned visit to Washington has been postponed; no reason cited, and no new date has been set, Isna reported. Iranian media reported of explosions in Jordan. Jordan Army said it downed two drones. CPC’s Black Sea terminal expected to resume oil loadings today following a one week suspension after drone attacks, sources say. Iranian Foreign Ministry Araghchi met with his Chinese counterpart, Mehr News reported; the sides discussed the Middle East situation. Iranian Foreign Ministry spokesperson said they have not accepted a 10 day ceasefire. Iranian Foreign Ministry spokesperson said they have not requested the resumption of talks with the US, intermediaries are conveying messages to the US. Kuwait has effectively made its territory available to the US. Iranian Foreign Ministry spokesperson said the situation around Hormuz has not changed, it remains shut. IDF intercepted two drones over the border with Jordan, TimesofIsrael's Fabian reported. Iranian army reiterates that it will response more severely to "any possible incursions by the enemies", Tasnim reported. Saudi Foreign Ministry said Saudi Arabia discussed with Oman the issue of ensuring the freedom and safety of navigation in the Strait of Hormuz, Al Hadath reported. NOTABLE US HEADLINES Sources say Bipartisan Senate talks over funding federal agencies past the 30th September deadline are trending in the right direction, Punchbowl reported.NORTH AMERICAN DATA US Durable Goods Orders MoM (Jun) M/M 0.3% vs. Exp. 1.6% (Prev. -4.5%). US Durable Goods Orders Ex Transp MoM (Jun) M/M 0.6% vs. Exp. 0.9% (Prev. 1.3%). US Durable Goods Orders ex Defense MoM (Jun) M/M 0.3% (Prev. -4.6%). NOTABLE APAC HEADLINES China has started mass production of domestically developed DUV lithography equipment, marking a further advance for the country's domestic semiconductor manufacturing industry, The Information reported.LATAM BTG/Nexus Poll: Lula hods lead over Bolsonaro; 47-43% (prev. 47-44%). Brazil's Finance Minister Durigan said interest rates in Brazil are very high; possibility of Brazil facing recession in 2027 does not exist; goal is to reduce the debt/GDP ratio starting 2030, current debt level "not good". Fiscal adjustment is the best way for the government to address the issue of high interest rates.