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Cracking Up And Joining Up

Zero Rss
3 weeks 6 days ago
Cracking Up And Joining Up

By Michael Every of Rabobank

Geopolitics is front and center, even in Argentina–England at the World Cup, where the contested Falklands/Malvinas, which could have oil reserves, saw jingoist 1980’s language. Yet it’s Hormuz, where 1980’s-style tanker wars are underway, that’s the penalty spot.

The US is striking Iran again night and day, as Tehran warns of an “existential war”. Reports have Trump leaning towards expanding US military operations; others say what he’s been hitting widen his options for escalation; and Trump has stated Iran “will be defeated soon.” However, the Financial Times today leads with Trump’s ex-defence chief saying the US will not win the war from the air, a sentiment echoed in the Wall Street Journal – and boots on the ground are highly unlikely.

Iran is attacking the Hormuz oil lifeline of ship-to-ship shuttle runs, with some vessels now reportedly refusing US-military guided transits. The US just hit a tanker heading for Kharg Island under the renewed Iran blockade, as some wonder again if the US could try to take control of Iran’s southern islands – which would certainly take boots on the ground.

The IRGC has threatened all global energy workarounds to Hormuz: that includes the Red Sea, where the Houthis may be preparing to attack; it might also involve Azerbaijan’s oil trade with Israel, meaning either striking Iran’s well-armed northern neighbour or the Eastern Mediterranean route its oil arrives via. Markets would move markedly if these developments were to occur.

Israel-Lebanon talks are getting some results, with agreement for Israel to pull back from two pilot zones to allow the Lebanese army to prove it can keep the territory free from Hezbollah – the IDF notably just killed three of the latter, and Trump is still talking about Syria fighting Hezbollah instead. PM Netanyahu will meet Trump in the US on Monday, as many fault lines are seen between the two. However, the flurry of radical domestic legislation the Israeli government just launched ahead of an October 27 election Knesset dissolution may suggest the foreign policy arena is not where they will look to flex for would-be voters.

Elsewhere, US General Caine is pleading with defense contractors to build weapons faster, as munitions constraints linger: the US Air Force plans to buy 28,000 low-cost cruise missiles ahead, showing procurement pivots are happening. The Secretary of War is also going to give US troops testosterone shots to make them stronger, as many NATO allies struggle to recruit the soldiers, sailors, and pilots that a military build-up will require; and senior defense officials are pushing for more censorship and are said to be looking at Cuba military options.

The EU again failed to strike a new Russia sanctions deal after three days of talks, with Athens reportedly opposing them to shield a Greek shipping company. On the other hand, the EU and Ukraine struck a deal to tap into €10bn of unspent SAFE funds to build drones in Ukraine – with a carve-out to buy some components from China. Ominously, Lithuanian and Latvian leaders also warned that Russia is planning infrastructure attacks on the Baltics or Poland, with other suggestions of potential false flag operations as the trigger for such.

Against that backdrop, and what Ukraine is doing to Russian refineries, a benchmark Bloomberg measure of crack spreads now stands above the panic peak of 2022, so while Brent oil is $85 --bang in line with where Joe DeLaura expected it to hover at while ‘Comfortably Bomb’ plays out-- the price of a barrel of diesel is around $147.  

The EU also just published a report calling China a “key enabler” and a “crucial enabler” of Russia’s war on Ukraine, further noting that: “At the centre of this transformation lies the determination of some powers, Russia and China foremost among them, to establish regional dominance and reshape the global order in line with their interests, fostering a return to a sphere-of-influence logic.”

That language echoes European complaints already made about the US, as a Pew survey shows that Xi now beats Trump in terms of popularity. But given nobody gets to vote on that, how much does such soft power matter? In that regard, the X thread from the US Under Secretary of War poopooing the idea of Middle Powers having options other than siding with the US (or China), which we noted yesterday, drew polarised reactions.

Those who pushed back strongest came from politics or economics, with a few from the military; by contrast, those who said the blunt (so unhelpful) US argument was true think across those disciplines. As a good example, Velina Tchakarova’s ‘The Middle Power Mirage: Colby, the Sceptics, and the Verdict Nobody Wants’ states: “Here is the strategic reality the convening class prefers to avoid. We are in a new Cold War between two systems, Pax Americana 2.0 and the DragonBear, the structural alignment of Chinese and Russian power across every systemically relevant domain. In that contest, middle powers without sufficient strategic leverage or autonomy will not be neutral conveners. They will be the first victims, hollowed out or cannibalized for the sake of global supremacy, or they will become the battlefield itself. There is no comfortable third space for the underprepared.” She also underlines that preparations can be made for that kind of third space, but they are fiscally, political-economically, and even ‘civilisationally’ uncomfortable.

That’s as EU-China trade data this week saw Brussels state that safeguard measures permitting tariffs and quotas against import surges may “become legitimate on a case-by-case basis.”; the UK Treasury suggest alignment of its financial system with the US, not the EU, and a stablecoins framework that opens the door for the USD variant to be used; Bloomberg says ‘Trump's Aides See China Cheating on Trade, But Shun Retaliation’ - there are too many fish to fry in Hormuz, it seems; and India’s PM Modi is pushing to cut import reliance to shield the economy from shocks.

Against this backdrop, national elections are now more existential than during the 2000’s policy consensus for ever more globalisation. Today, each vote can push or pull economies towards one of the two global poles of power, tipping the balance between them and/or legacy vs emerging stakeholders within them.

In that light, Trump is to give an address today focused on “free and fair elections” rumored to be politically explosive, as Democratic Party Senator Fetterman warns he’ll leave the party if it turns its back on Israel, and Supreme Court justices worried about their safety were told by Congress, “There’s not a money fairy up here.” In the UK, the terror inquiry into the murder of former MP Ann Widdecombe continues, as a man was arrested for threatening to shoot Reform UK leader Nigel Farage, who is involved in a scandal over a cash gift ‘for his security’. The Times of Israel opines that ‘Netanyahu hits new lows in his battle for survival; there will be a great deal of damage for better leaders to undo’; and Ukraine’s President Zelenskyy just ousted his reformist defence minister amid a government reshuffle, which critics have called a serious strategic error.

In short, norms are cracking up around us, not just in refined products, but in less ‘refined’ economics and politics.

To predict how this plays out one needs to join things up; and that involves looking at who is willing to join up, and where.

Tyler Durden Thu, 07/16/2026 - 09:30
Tyler Durden

'Slow Hire, No Fire' Economy Confirmed As Jobless Claims Drop Near Record Lows

Zero Rss
3 weeks 6 days ago
'Slow Hire, No Fire' Economy Confirmed As Jobless Claims Drop Near Record Lows

The number of Americans filing for unemployment benefits for the first time dropped to just 208k last week - back near its lowest level on record...

...and still showing no signs of stress in the US Labor market.

Continuing jobless claims also fell last week to 1.805 million Americans...

And all of this positive labor market (no fire) news comes as payrolls suggests weaker growth...

It appears the US economy has morphed into a 'slow hire, no fire' regime.

Tyler Durden Thu, 07/16/2026 - 08:56
Tyler Durden

Despite Slumping Sentiment & Lower Gas Prices, The American Consumer Is Still Spending Strongly

Zero Rss
3 weeks 6 days ago
Despite Slumping Sentiment & Lower Gas Prices, The American Consumer Is Still Spending Strongly

While headline spend at gas stations is expected to decline (due to tumbling pump prices), BofA's almost omniscient analysts forecast a stronger than consensus print for today's US Retail Sales data.

After a big jump in May (revised up), June's Headline retail sales rose 0.2% MoM (as expected), with sales up 6.7% YoY (down modestly)...

Gasoline Stations sales saw the biggest decline (along with small drops in Health Personal Care and Food and Beverage). Nonstore Retailers saw the biggest jump in spend along with Motor Vehicle and Parts Dealers...

That was the biggest monthly drop in gasoline station sales since Dec 2022...

Nonstore Retailers, Gasoline Station, & Motor Vehicle sales are the biggest drivers of annual (NSA) growth...

Core (Ex-Autos) fell 0.2% MoM and Ex-Autos and Gas rose 0.4% MoM (so declining gas spend was notable), but annual growth in spend remains strong...

Most notably, the Control Group - which feeds directly into the GDP calc - jumped 0.5% MoM (as expected)

Interestingly, 'real' retail sales (admittedly crudely adjusted via CPI) continue to rebound from a negative print in December to its highest since March 2022...

Finally, the American consumer appears to still be spending despite survey-based catastrophic slump in sentiment...

Admittedly, lower-income households have indeed felt the pinch of the gas shock more: they’ve seen a larger increase in necessary spending, which has led to a widening of the “K” in discretionary outlays.

Will that start to ease now that gas prices are starting to tumble? (although rising in recent days).

Tyler Durden Thu, 07/16/2026 - 08:38
Tyler Durden

Futures Slide After Another Korea Rout, TSMA Results Revive AI Fears

Zero Rss
3 weeks 6 days ago
Futures Slide After Another Korea Rout, TSMA Results Revive AI Fears

Futures are lower, erasing much of yesterday's gain with both Nasdaq and Rusell lagging SPX, following a continued rollercoaster in Korea where stocks tumbled after the BOK hired rates for the first time in 3 years. As of 8:15am ET, S&P futures dropped 0.3%, while Nasdaq 100 contracts dropped 0.8%. In premarket trading, semis are weaker again while Mag7 is stronger (AMZN, GOOG, META, and MSFT all up are least 1.2%) with the market having "a defensive tilt as the AI theme is poised to move lower" per JPM. A strong earnings beat and raised sales outlook from TSMC failed to trigger fresh gains for the sector that has fueled most of this year’s stock market gains. Europe’s Stoxx 600 was down 0.6%. WTI trading in a tighter range into Trump’s speech, AI / Semis are driving mkts with TSM ADRs indicated -3.5% their print may not be enough to buoy the group. Korea moves to tighten rules around levered ETFs, so more near-term downside may ensue. US to set 25% tariff for Brazil on July 22, ex-beef / coffee / ethanol products. Pre-mkt, bond yields are +2bp with USD flat. Commodities are lower across all 3 complexes though base metals are bid. Today’s macro data focus is on Retail Sales where a stronger print may pull some inflows into consumer-related segments, which still have light positioning. 

In premarket trading, Mag 7 stocks are mixed (Alphabet +1.3%, Microsoft +1.3%, Amazon +0.7%, Meta +0.3%, Apple +0.4%, Tesla -0.2%, Nvidia -1.5%)

  • AtaiBeckley (ATAI) leaps 34% as Eli Lilly is in talks to acquire the psychedelic drugmaker, according people familiar with the matter. Analysts are positive about the psychedelic sector; RBC singles out GH Research (GHRS +18%) for a direct read-across.
  • GE Aerospace (GE) declines 4% after the world’s largest jet-engine manufacturer posted second quarter results and provided an updated forecast.
  • United Airlines (UAL) falls 3% after the airline’s updated full-year adjusted EPS forecast trailed the average analyst estimate.
  • UnitedHealth Group (UNH) is up 7% after the health conglomerate raised its outlook for the year and reported quarterly profit well ahead of Wall Street’s views, helping to solidify the company’s earnings recovery after a historic collapse. Shares of peer insurers are up on the news: Humana (HUM) +5%, Centene (CNC) +3%.

In other corporate news Hyundai Motor is moving to acquire SoftBank’s remaining stake in Boston Dynamics, securing full ownership of the robotics pioneer at a steep discount. ABB agreed to buy British industrial components company Rotork for an enterprise value of around $5.5 billion to expand its electrification and automation businesses. Japan is planning to buy 27,500 next-generation Rubin chips from Nvidia to build a homegrown foundational AI model for robots. Jensen Huang said Nvidia’s next-generation AI accelerator systems were in production and on track for delivery. The AI frenzy is showing up in Asia airlines’ cargo bays helping to mitigate the surge in jet fuel costs. 

TSMC hiked sales and spending projections for the year, signaling its confidence in the demand for chips and data centers holding up through 2027 and beyond. However, American depositary receipts for the firm are down 4.6% during premarket trading, while peers like Micron, Marvell and Nvidia also declined.  With TSMC’s results, concern around AI — and the capital spending behind it — has been brought back to the forefront. Traders have become more critical over AI this year, rotating out of stocks linked to the technology on the basis that the spending has failed to produce meaningful returns.

Chipmakers’ leading role in this year’s equity advances is increasingly coming under strain as traders grapple with lofty stock valuations and whether AI hyperscalers are building more capacity than they will need. Investors are also looking for opportunities to rotate to other sectors within the AI trade that will benefit from the global buildout at more attractive prices.

The latest rout in Korean stocks (full discussion in a subsequent post), sparked selling in tech names, even after Taiwan chip giant TSMC raised its spending and revenue projections for the year, reflecting its confidence that torrid growth in demand for chips and data centers will extend into 2027. TSMC also plans to spend an additional $100 billion to expand US chipmaking capacity. Still, such strong earnings alone aren’t sustaining the momentum trade, signaling that investors are reducing risk. Indeed, as Goldman noted yesterday, we have now seen the worst monthly plunge in high beta momentum since the Global Financial Crisis.

With signs of memory capacity expansion, and Chinese competition ramping - investors might begin to look through perceived low P/E multiples and focus on a more cyclical measure of price/book, which paints a contrasting picture.  

Korea’s Kospi was hit particularly hard, down 6.4%, as its two main heavyweights, Samsung and SK Hynix both fell more than 10%. Korean authorities moved to curb volatility, announcing a temporary halt on new listings of single-stock leveraged exchange-traded products tied to the chipmakers.

“There’s been a lot of concentration in the market and that means there’s little room for error,” said Richard Flynn, managing director at Charles Schwab UK. “Global geopolitical risk is elevated and so there’s a relative tone of caution fundamentally looking at the macro outlook.”

“There’s been a lot of rotation within the AI trade, and a small rotation more broadly,” said Toni Meadows, head of investments at BRI Wealth Management. “It’s probably a healthy thing to have consolidation. The further things go, the more stretched they get and then the reaction is bigger.”

After two days in which softer-than-expected inflation data saw traders dial back their expectations for Federal Reserve interest rate hikes this year, June retail sales numbers will put the spotlight on the strength of American consumers.

In geopolitics, the IEA boss warned the global economy is in peril if the Hormuz crisis persists. US Trade Representative Jamieson Greer offered praise for Switzerland’s stance in trade negotiations and its investments in the US, a positive sign for the European nation as it looks to secure a 15% tariff and avoid further confrontation with Trump. The US will begin charging a 25% tariff on imports of certain goods from Brazil following an investigation alleging that the country engaged in unfair trade practices.

In hedge fund news, King Street Capital Management told clients it’s significantly restricting withdrawals from its main hedge fund, moving investors who want to exit to a separate vehicle that will sell off the assets over time. 

European equities edged lower on Thursday with the Stoxx 600 down 0.4%, as utilities and telecommunications shares led declines, while the biggest outperformers are media and banking stocks. Here are the biggest movers Thursday

  • Indutrade shares surge as much as 14% after the Swedish flow control equipment firm’s second-quarter results beat estimates. Analysts at SB1 Markets said the company is poised to win consensus upgrades
  • Diploma shares rise as much as 5.4%, the most in nearly two months, as the equipment supplier upgrades full-year guidance again
  • Publicis shares rise as much as 4% after the advertising agency raised the low-end of its organic revenue growth guidance, saying new business wins are contributing about 2 percentage points of extra growth on FY basis
  • De’Longhi rises as much as 4.9% in Milan, the most since May, after Goldman Sachs initiated coverage with a buy rating, citing the household appliance maker’s exposure to the growing espresso coffee market
  • Dunelm shares rise as much as 5.6%, hitting a four-month high, after the homeware retailer reported better sales growth in the fourth quarter compared to the exit rate coming out of the third
  • Telenor shares fall as much as 13%, the steepest drop since October 2008, after the Nordic telecom operator reported second-quarter results that missed estimates and lowered its full-year guidance
  • ABB falls as much as 4.1%, erasing an initial gain of 1%, after the industrial group reported second-quarter results with focus on the company’s announcement that it would buy Rotork for $5.5 billion
  • Partners Group shares fall as much as 8.2%, the most in six weeks, after the Swiss alternative asset manager’s first-half net inflows disappointed analysts
  • Experian shares fell as much as 7.1%, as the credit checking company’s first-quarter organic revenue growth moderates. Analysts say the results were largely expected
  • Frasers shares drop as much as 5.9%, underperforming the FTSE 250 Index on Thursday morning, after the UK retailer reported weaker-than-expected adjusted pretax profit for the year
  • Ocado shares slide as much as 17%, to the lowest price since 2013, after the online grocery firm confirmed further delays to multiple customer fulfillment centers

Asian stocks slumped as investors accelerated semiconductor selling, dragging down sector‑heavy markets and souring broader sentiment. The MSCI Asia Pacific Index slid as much as 2% before paring some losses, as the stock markets in South Korea, Japan and mainland China registered losses. Korea’s Kospi was hit particularly hard, down 6.4%, as its two main heavyweights, Samsung and SK Hynix both fell more than 10%. Korean authorities moved to curb volatility, announcing a temporary halt on new listings of single-stock leveraged exchange-traded products tied to the chipmakers. Hong Kong’s Hang Seng Index bucked the trend to gain 1.3%, as investors rotated into the Chinese internet giants such as Alibaba and Tencent. Most Southeast Asian markets, such as Thailand, Malaysia and Indonesia, also traded higher. 

Korea, Taiwan and Japan have been among the global leaders this year, but face mounting scrutiny as investors question whether the AI rally can last. A gauge of Asian chipmakers fell as much as 4.6%. Still, Taiwan Semiconductor Manufacturing Co. provided more signs of sustained AI demand, when it raised its spending and revenue projections for the year. With leading Korean chip names down, investors are rotating out of the country, said Yi Ping Liao, portfolio manager at Franklin Templeton. “But interestingly it doesn’t look like a broad based rotation out of tech as Taiwan tech and China tech remain well supported.”

“Now that selling momentum builds in the Korean semis, investors are returning to China where valuations are depressed,” Vey-Sern Ling, managing director at Union Bancaire Privee, said, adding China’s tech performance has been inversely correlated with high-flying Korean memory names recently.

 

In FX, the Bloomberg Dollar Spot Index is near flat with muted moves across the G-10 complex.

In rates, treasuries fall despite a pullback in oil prices that correlations suggest should be accompanied by gains for bonds. That’s not been the case however with US 10-year yields rising 2 bps to 4.57%. UK and German government bonds are nursing similar sized declines. Long-end yields cheaper by around 3bp and the curve slightly steeper, amid similar moves in European bonds. The price action unwinds a portion of the sharp rally over the past two days spurred by soft CPI and PPI prints. Treasury yields are 2bp-3bp cheaper across the curve with 5s30s spread steeper by around 1bp, adding to its sharp widening since Tuesday. 10-year is around 4.57% with bunds and gilts similarly cheaper. IG dollar issuance slate includes a couple of deals. JPMorgan and Morgan Stanley headlined a $23.6 billion slate Wednesday with $9 billion offerings. Issuers paid an average of about two basis points in new issue concessions on deals that were 4.1 times covered. Focal points of US session include June retail sales data and several Fed speakers. 

In commodities, Brent crude futures fall 0.8% to around $84.30 a barrel even after the US struck Iran for a fifth straight day. European natural gas futures are down 1%. Bitcoin falls over 1% while precious metals are also in the red.

US economic data calendar includes July New York Fed services activity, weekly jobless claims, July Philadelphia Fed business outlook index, and June retail sales (8:30am), July NAHB housing market index, May business inventories and June pending home sales (10am). Fed calendar includes Dallas Fed’s Logan (12:30pm), Kansas City Fed’s Schmid (1:25pm) and Vice Chair Jefferson (7pm)

Market Snapshot

Top Overnight News

  • The US struck Iran for a fifth straight day overnight and hit a sanctioned oil tanker near the country’s main export terminal. Iran fired at US bases in Kuwait and Jordan. BBG
  • Iran allowed an American citizen to go free after preventing her from leaving the country for a year and a half, a move President Trump called a “gesture of good will” amid a deepening standoff between the two foes. WSJ
  • The Trump administration said on Wednesday that it would impose a new 25 percent tariff on Brazil next week, arguing that the country had adopted a range of unfair trade practices against the United States. The tariff will apply to thousands of Brazilian products, but will exempt several major categories of exports, including oil and gas, beef, coffee, oranges, and aircraft parts. The tariff will apply to Brazilian ethanol, and take effect next Wednesday. NYT
  • South Korea’s central bank raised interest rates for the first time in over three years, joining its global peers to tighten policy in the face of inflation fueled by the U.S.-Iran conflict. Bank of Korea Gov. Shin Hyun-song said that the bank would tighten policy further in coming months, citing stronger-than-expected economic growth and inflation. WSJ
  • South Korea’s top financial regulator unveiled measures to curb risks from single-stock leveraged exchange-traded funds, seeking to stabilize a local stock market that has seen wild swings, as individual investors use debt to chase profits amid artificial-intelligence-related jitters. The Financial Services Commission said Thursday that it would suspend new listings of single-stock leveraged ETFs, ban securities firms and asset managers from advertising or marketing such products. WSJ
  • Baidu plans to pursue a dual primary listing in the US and Hong Kong, a move that will allow it to tap mainland Chinese investors. BBG
  • UK economic data for May was mixed, with modestly better GDP and manufacturing production while industrial production fell slightly short . BBG
  • Smoke blanketed parts of the Northeast, Midwest and Great Lakes as hundreds of wildfires burned across Canada. New Yorkers face unhealthy air again today and are advised to stay indoors, according to state data. BBG
  • The dip in SpaceX's shares below its blockbuster IPO price of $135 a share is an ominous sign ‌for Elon Musk's internet and rocket company as it faces more potential volatility in early August, when the number of shares available for trading on the Nasdaq stands to increase significantly from the lockup expiration. Reuters
  • The market has priced a large US growth upgrade and more hawkish policy views versus before the war. Goldman
  • BofA week-to-July 11th total card spending +4.5% (prev. 4.8%); spending growth slowed but remains solid.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were ultimately mixed, albeit with a mostly negative bias in the major indices, as risk sentiment was dampened by a sell-off in semiconductor stocks. ASX 200 was subdued with the index pressured by losses in miners after BHP reported lower output. Nikkei 225 slid below 67,000 with chip-related stocks over-represented in the list of worst performers. KOSPI triggered sidecars as Samsung Electronics and SK Hynix slumped alongside the semiconductor sell-off, while the BoK also raised its key rate by 25bps to 2.75%, as expected, and signalled further action. Hang Seng and Shanghai Comp were mixed with the mainland in the red following disappointing loans and financing data, while the Hong Kong benchmark rallied amid strength in hyperscalers following reports that US companies were increasingly adopting open-weight Chinese AI models and that Alibaba's Qwen AI would be integrated into Apple Intelligence in China.

Top Asian News

  • South Korea Financial Regulator said they are to revise rules on single-stock leveraged ETFs to temporarily halt new single leveraged products from listing. The minimum required investor deposit is to be raised to KRW 30mln from KRW 10mln.
  • Japanese Finance Minister Katayama reiterated they will take appropriate action on FX anytime as needed, although she won't comment on specific FX levels, and stated they will monitor market developments and economic indicators to achieve fiscal sustainability.

European bourses (STOXX 600 -0.3%) begin Thursday’s trade entirely in the red, with underperformance in the SMI (-0.9%) after earnings from Partners Group and ABB. On the data front, UK GDP M/M printed 0.1% M/M, in line with expectations, while the 3M ticked down to 0.7%, from 0.8%, but beat the 0.5% consensus; no reaction seen in the FTSE 100. Sectors highlight the negative bias, with Media (+0.6%) the only sector printing modest gains after earnings from Publicis (+2.1%), raising its FY revenue guidance. Underperformance is seen in Utilities (-1.1%), followed by Industrial Goods & Services (-1.0%) and Financial Services (-1.1%). US equity futures follow their European peers, trading entirely in the red, despite strong TSMC earnings and an Nvidia announcement. For TSMC, the Co. reported Q2 metrics that beat estimates and raised its Q3 revenue guidance. Additionally, the Co. is to add another USD 100bln of US investment. For Nvidia, the Co. announced that Japan, through Noetra, will buy 27,500 Rubin chips to build AI models for robots.

Top European News

  • Italy PM Meloni’s electoral reform has been approved by Italy’s lower house in a vote.

FX

  • G10s lack direction against the Buck in light newsflow. GBP, CHF and NOK all lower after recent gains.
  • DXY is marginally firmer, but USD gains are mixed against other G10 peers. Today’s calendar sees a few Fed speakers, Logan, Schmid and Jefferson, and the data slate features Retail Sales and weekly jobless claims.
  • NOK and CHF are the worst performers against the Greenback, which attempts to retrace lost ground with energy prices weighing on NOK, and USD/CHF garnering support around 0.8050.
  • Not too much was learned from the UK GDP reading for May, which rose but fell short of expectations. On Wednesday, GBP rallied after a number of outlets reported that Mahmood was set for the Chancellor role. Currently, GBP/USD is holding onto gains just above the 1.35 mark.
  • EUR is flat against the USD and slightly firmer against GBP, with bloc-specific newsflow light. For now, EUR trades within a narrow 1.1460-74 range. EZ calendar light with ECB on its quiet period ahead of its policy meeting next week.

Fixed Income

  • Global fixed income benchmarks are modestly softer across the board, with a lack of clear drivers, and as US-Iran strikes continue to stoke fears of prolonged inflation.
  • Gilts (-15 ticks) trade at the lower end of its 87.15-87.60 range, giving back some of Wednesday’s gains. This morning, UK GDP printed 0.1% M/M, in line with expectations, while the three-month gauge ticked down to 0.7% (from 0.8%), but still beat the 0.5% consensus. Politics remain front and centre: reports on Wednesday suggest that incoming PM Andy Burnham is likely to appoint Home Secretary Mahmood as the next Chancellor. Markets have taken this as a positive as she is seen as fiscally conservative, though many still seek clarity on her broader positions. Polymarket gives Mahmood a 63% chance vs Miliband's 9% to become the next Chancellor. The UK had a decent auction, however demand did fall from the prior auction
  • OATs (-22 ticks) follow their European peers lower. Politics remains in focus; recently, RN's Le Pen was found guilty of embezzlement by the Paris court, but given the timing of the first round of the Presidential Election, she is eligible to run for President. Since then, she announced she would appeal the court's decision and has launched her Presidential campaign. Polls show that Le Pen has extended her lead, with support rising to above 35% from 33% before she announced her bid. Today’s auctions came broadly in line with priors, with demand holding near 3x.
  • USTs (-7 ticks) look ahead for more Fedspeak, with Logan, Schmid and Jefferson all set to speak on the economy and economic outlook today (note: Jefferson is after hours). On the data front, initial jobless claims and retail sales are the highlights.
  • The UK sells GBP 4.25bln 4.875% 2036 Treasury Gilt: b/c 3.13x (prev. 3.46x), average yield 5.040% (prev. 4.858%), tail 0.1bps (prev. 0.1bps).
  • France sells EUR 13.999bln vs exp. EUR 12-14bln 2.40% 2029, 1.50% 2031, 3.25% 2032 and 3.50% 2033 OAT.
  • Spain sells EUR 5.974bln vs exp. EUR 5-6bln 2.35% 2029, 3.55% 2033 and 3.95% 2056 Bono.

Commodities

  • The situation between the US and Iran remains volatile. Overnight, the US completed another round of strikes on various parts of Iran, targeting military capabilities. Tehran responded with its own attacks on Kuwait and Jordan.
  • The path to peace currently remains uncertain. President Trump said that strikes would expand next week; a recent report via the WSJ suggested that Trump is leaning toward expanding US military operations in Iran after days of briefings from top aides. If this proves to be the case, then the risk is that Iran responds with a harsher response against its regional peers. Thus far, Iran has generally avoided energy infrastructure across Gulf nations, but a US expansion could see Iran begin to target Gulf energy facilities, posing risks for oil supply. In the immediate term, the Strait remains shut and near-term flows have been slowed; longer-term, severe facility damage could see halts to production for several months/years, analysts say.
  • Despite these risks, crude benchmarks are trading lower this morning; Brent Sep’26 (-0.5%) trades within a USD 84.30-85.55/bbl range. Price action was lacklustre overnight and into the European morning. However, some modest upticks (c. USD 0.30/bbl) were seen after an Iranian Top Military Commander stated that the Strait of Hormuz is a red line and added that all infrastructure in the region will be "crushed" if the US continues its interference.
  • Spot gold (-0.6%) moved lower throughout the APAC session. The subdued action filtered through into London hours; currently holding at session lows of USD 4,024/oz (vs peak of USD 4,064/oz). Action, which is a bit of a paring back from the gains seen in the past couple of sessions. Elsewhere, base metals hold a modest positive bias. 3M LME Copper (+0.3%) holds within a USD 13,541-13,648/t range.
  • Crude oil flows were suspended at all Iraqi oil loading terminals following a drone crash into an oil tanker at Iraq’s Basra terminal; no damage or fires were reported, security sources said.

Trade/Tariffs

  • The US is to set a 25% tariff on some Brazil goods from July 22nd, with coffee and beef exempted.
  • USTR Greer said that Canada offers no concessions and that Mexico is pragmatic in USMCA talks.

Central Banks

  • BoK raised its 7-day Repo Rate by 25bps to 2.75%, as expected. BoK said the rate decision was unanimous and growth rate this year is expected to considerably surpass the May forecast of 2.6%. Will assess timing of further increase in inflation pressure, improvement trend in the economy and financial stability.
  • BoE's Breeden said it is important firms are stress testing AI valuations. The Iran war shock is less likely to become embedded and lead to inflationary dynamics that members might need to lean against.
  • NBP's Zarzecki said the base case is for rates to remain unchanged until the turn of 2026/27, with rates likely to rise in 2027.
  • SNB Minutes (Jun): Although inflation risks have increased in recent months and stronger second-round effects are possible, there is no immediate need for action.

Geopolitics

  • US President Trump posted that Iran allowed a US citizen who was wrongly detained in December 2024 to leave the country. Trump added that the citizen is now safely outside of Iran and in good condition, while he stated that the US appreciates the gesture of goodwill by Iran.
  • US VP Vance said Israel is more effective than most at influencing the US, and that some people in the Israeli government want war indefinitely. Furthermore, Vance said they are not going to send ground troops for regime change and that the US will not simply engage in endless bombing of Iran.
  • US CENTCOM said forces conducted operations for a second wave of strikes on Wednesday against Iran and that US forces disabled a non-compliant vessel in the Arabian Gulf, while it denied Iranian claims that US forces struck a civilian wheat storage facility in Hoveyzeh on July 14th and described the reports as false.
  • Explosions were heard in Iran's Khorramabad, and US air strikes targeted areas in Tehran. Explosions were also heard in Iran's Qeshm and Bandar Abbas, while US projectiles hit near Sirik.
  • Iran attacked economic interests and US facilities in Kuwait, while at least 10 explosions were heard at the US Navy's Fifth Fleet Headquarters in Bahrain, and Iran also targeted Jordan.
  • Kuwait said its armed forces intercepted four cruise missiles and 21 drones from Iran on Wednesday, while Iranian aggression targeted a number of vital facilities, resulting in material damage, although no injuries were reported.
  • Iran's Top Joint Military Command said the Strait of Hormuz is a red line and added that all infrastructure in the region will be "crushed" if the US continues its interference.
  • Houthis were reportedly laying the groundwork and quietly extending their reach to the Horn of Africa, according to the Telegraph citing sources in Yemen, with Houthi rebels reportedly preparing to shut the Bab el-Mandeb Strait on behalf of Iran. Furthermore, sources said the effort was a deliberate Iranian attempt to control "the other side of the Red Sea" and create a situation similar to its grip on the Strait of Hormuz.
  • Israeli Defence Minister said US operations against Iran was discussed in the phone call with the US Secretary of State Rubio, and said Israel will remain in security zones in Syria, Gaza and Lebanon. 
  • Ukraine's security service said it struck two Russian shadow fleet tankers in the Black sea and hit six more tankers and two tug boats in the Sea of Azov and Black sea. 
  • US and Iraq to announce USD 60bln in commercial deals as Trump pivots US-Iraq ties towards commerce over military, according to Semafor.

US Event Calendar

  • 8:30 am: Jul Philadelphia Fed Business Outlook, est. 12.5, prior 10.3
  • 8:30 am: Jun Retail Sales Advance MoM, est. 0.2%, prior 0.9%
  • 8:30 am: Jul 11 Initial Jobless Claims, est. 217k, prior 215k
  • 8:30 am: Jun Retail Sales Ex Auto MoM, est. -0.1%, prior 0.8%
  • 8:30 am: Jul 4 Continuing Claims, est. 1817.5k, prior 1814k
  • 10:00 am: Jun Pending Home Sales MoM, est. -0.5%, prior 3.8%

Central Bank speakers

  • 12:30 pm: Fed’s Logan Speaks on the Economy and Monetary Policy
  • 1:25 pm: Fed’s Schmid Speaks at Kansas City Fed Economic Forum
  • 7:00 pm: Fed’s Jefferson Speaks on Economy and Monetary Policy

DB's Jim Reid concludes the overnight wrap

As hearts were broken in England, markets continued to shrug off the recent escalations in the Middle East and have mostly had a positive last 24 hours. Admittedly, there’s been some weakness among chip stocks in Asia this morning, but otherwise, markets benefited from a soft US PPI print which continued to drive a dovish repricing. Indeed, the probability of a Fed rate hike in a couple of weeks’ time now stands at just 10% this morning, the lowest it’s been since the Fed’s last meeting that led to the imminent hike speculation in the first place. Moreover, oil prices finally stabilised after their jump earlier this week, with Brent crude (+0.26%) up only marginally yesterday, and they’ve since fallen back -0.22% overnight to $84.76/bbl. Meanwhile, risk appetite also remained resilient, with the S&P 500 (+0.38%) closing just half a percent from its record high last month, and futures for the index are up another +0.13% this morning.  

As on Tuesday, that US inflation print really cemented investor confidence in the dovish narrative this week. Notably, headline PPI was down -0.3% in June (vs. unch expected), but we also had a big downward revision to the May reading, which fell half a point to +0.6%. So the recent inflation picture was softer than originally thought, with the year-on-year PPI reading down to +5.5% (vs. +6.2% expected). And significantly for investors, there wasn’t any obvious alarm either from the components that feed into PCE inflation (the Fed’s target measure). See our US economists’ inflation recap here.

That backdrop meant investors continued to dial back the chances of a Fed hike, with US Treasury yields coming down across the curve. For instance, the 2yr yield (-5.9bps) was down to 4.14%, whilst the 10yr yield (-4.2bps) fell to 4.55%. We also heard from Fed Chair Warsh once again, who was appearing before the Senate Banking Committee. The new Chair said he “repeatedly” told Trump that he would be independent, but there were no major policy headlines from his session and little to point towards an imminent hike. Separately, Fed Governor Cook maintained a hawkish-leaning tone, saying that the FOMC can take its time to observe more data but that “If we do not see signs of disinflation soon, I am prepared to act”.

As all that was happening, oil prices fluctuated amidst the competing headlines out of the Middle East, but they ultimately stabilised after their sharp jump earlier in the week. In terms of the latest developments, oil prices initially eased back yesterday but then edged higher as US forces conducted new strikes overnight and the WSJ reported that Trump was leaning towards expanding military operations against Iran. But overall, Brent crude has been broadly flat, with a modest +0.26% increase yesterday to $84.95/bbl, and overnight it’s since fallen back -0.22% to $84.76/bbl.  

For US equities there was another decent performance as well yesterday, aided by the dovish repricing. Moreover, the latest earnings results added further support, with BlackRock (+6.63%) as the second-best performer in the S&P 500 yesterday after its results beat expectations. So that helped the S&P 500 (+0.38%) to post a second daily increase, despite a drag from chip stocks, as the Philly semiconductor index fell -2.08%. But other tech stocks fared better, with the NASDAQ up +0.62%. Moreover, the Mag-7 rallied +2.31%, led by Apple (+4.01%) after it received government approval to roll out Apple Intelligence in China.  

Those themes have continued overnight, with weakness among chip stocks dragging down some of the major indices in Asia. For instance, it’s been another volatile day for the KOSPI (-6.55%), which is currently on track for a two-month low as it stands, having shed over -25% since its peak less than a month ago. And we’ve seen weakness in Japan as well overnight, with the Nikkei down -2.48%, and in mainland China the CSI 300 (-0.91%) and the Shanghai Comp (-0.82%) have also fallen. The one exception to that is the Hang Seng, which is up +1.93% this morning.

In other news overnight, the Bank of Korea delivered their first rate hike since 2023, with a 25bp hike that took the policy rate to 2.75%. The move was in line with consensus, and their statement said that “inflation is expected to remain above the target level for a considerable time”, and they said that growth this year “is expected to considerably exceed the May forecast of 2.6%.” Meanwhile, they also signalled further hikes ahead, saying that “it is judged that it will be necessary to continue a policy stance consistent with further rate hikes”.

Staying on central banks, we also heard from the Bank of Canada yesterday, who kept rates unchanged as the consensus expected. There was some optimism however, as their statement said that the economy was “showing signs of improvement”. But the market reaction was pretty muted, and the decline in 10yr Canadian bond yields (-4.3bps) was almost exactly in line with that for 10yr US Treasuries.

Earlier in Europe, there was also a weaker performance yesterday, with yields moving higher as concern grew on the inflation side. The problem was that even as oil prices fell back, natural gas prices continued to tick higher, with European futures hitting a fresh 3-month high yesterday of €54.35/MWh. So that backdrop saw yields on 10yr bunds (+0.7bps), OATs (+1.8bps) and BTPs (+2.6bps) all move higher, although the STOXX 600 (+0.10%) managed to eke out a modest gain, even as the DAX (-0.59%) and FTSE-MIB (-0.85%) saw larger declines.

Finally, with Andy Burnham set to become UK Prime Minister next week, the FT reported that the next Chancellor of the Exchequer was likely to be Shabana Mahmood, the current home secretary. This had been a key focus for UK markets in recent days, and the pound strengthened on the headlines, ending the day up +1.12% against the US dollar at $1.3540. Moreover, gilts also extended their outperformance after the news, with the 10y yield (-3.8bps) down to 4.94%, the opposite direction to yields in continental Europe.

Looking at the day ahead, US data releases include retail sales and pending home sales for June, the NAHB’s housing market index and the Philadelphia Fed’s business outlook survey for July, and the weekly initial jobless claims. Meanwhile in the UK, we’ll get the monthly GDP print for May. Otherwise, central bank speakers include the Fed’s Logan and Schmid. Finally, today’s earnings releases include Netflix, Morgan Stanley and Johnson & Johnson.

Tyler Durden Thu, 07/16/2026 - 08:25
Tyler Durden

The Big Pharma Psychedelic Buyout Spree Has Begun

Zero Rss
3 weeks 6 days ago
The Big Pharma Psychedelic Buyout Spree Has Begun

Submitted by QTR's Fringe Finance

Massive validation for psychedelics…not as drugs, but as investments could be moments away. Just months after I argued for the millionth time that psychedelic drug developers were likely to become acquisition targets as the sector gained legitimacy, it looks like the first major domino may finally be falling.

According to a Bloomberg report published moments ago, Eli Lilly is in talks to acquire AtaiBeckley, one of the leading developers of next-generation psychedelic therapies. While nothing is finalized, Bloomberg reports a deal could be announced as soon as this week, with Lilly negotiating at a premium to AtaiBeckley’s roughly $2 billion market value.

If this transaction gets across the finish line, I don’t think it’ll be remembered as an isolated acquisition. I think it’ll be remembered as the moment Big Pharma officially entered the psychedelic arms race.

I’ve been writing for well over a year that investors were dramatically underestimating how this story would unfold. Most people focused exclusively on whether psychedelic drugs would work. I was far more interested in what would happen once they did.

Back in January when absolutely no one was talking about the sector, I officially hung my balls out there and name it my “Best Idea” sector for 2026. I argued that these companies didn’t need everything to go right. They simply needed legitimacy. Once regulators, clinicians and large pharmaceutical companies accepted these therapies as real medicine instead of fringe science, today’s tiny clinical-stage companies could quickly become strategic assets.

That thesis suddenly looks a lot less theoretical. According to Bloomberg, Lilly has been quietly evaluating the psychedelic space for some time. The acquisition target makes perfect sense.

While the company has become synonymous with obesity drugs over the last several years, many investors forget Lilly built one of the most successful antidepressants in history with Prozac and has continued investing heavily in neuroscience, Alzheimer’s disease and non-opioid pain therapies. Psychedelics are simply the logical next frontier…and I’ve constantly argued they could be a threat to antidepressants.

None of this should come as a surprise to longtime readers.

Just weeks ago, one of my “26 Stocks to Watch for 2026,” Definium Therapeutics, exploded higher after reporting successful Phase 3 results for its LSD-based treatment for major depressive disorder.

The stock surged more than 60% in one session and roughly tripled from where it began the year. When I wrote about those results in June, I reminded readers that my bullish thesis on psychedelics had never been based solely on clinical efficacy. It was based on legitimacy.

I’ve been pounding the table on psychedelic companies since early 2025 because I believed the science was continuing to improve while Washington’s posture toward the sector was quietly changing underneath the surface.

I was writing about these stocks 18 months ago, first in January 2025, calling the psychedelic names “stocks to watch” for the year. Then, in July 2025, urging patience in these positions: Being Early—And Patient—In Psychedelics

Earlier this year I argued that Robert F. Kennedy Jr.’s Department of Health and Human Services would likely help accelerate institutional acceptance of these therapies, particularly for veterans suffering from PTSD, addiction and depression.

In April, after the administration’s executive order supporting psychedelic research, I reiterated my bullish stance and argued that we were moving from the phase where these therapies were ignored into the phase where institutions would be forced to engage with them seriously. That transition appears to be underway.

The administration has publicly supported psychedelic research, federal agencies appear increasingly willing to engage with the field, states continue building regulatory frameworks around treatment programs and the stigma surrounding these compounds has steadily eroded.

Back in January, I wrote that the market was dramatically underpricing one simple reality. These weren’t speculative science projects anymore…they were organized, capitalized pharmaceutical development programs.

As I wrote earlier this year, these companies don’t necessarily need dozens of approvals. They need legitimacy. Once legitimacy arrives, capital follows.

Today we’re beginning to see exactly what that looks like.

I've also remained a believer that the AdvisorShares Psychedelics ETF (PSIL) is one of the best ways to gain diversified exposure to the theme. Earlier this year, I even reiterated what many people thought was a ridiculous prediction when I first made it: that PSIL could eventually trade north of $100 if psychedelic medicine evolves into a mainstream investment theme.

That isn't a forecast for next month and it certainly isn't a guarantee. It's simply a reflection of what can happen when an entire sector goes from being dismissed and ignored to becoming institutionally accepted. Markets have a long history of dramatically underpricing paradigm shifts before ultimately overshooting in the opposite direction. If psychedelics follow a similar path, I still believe the long-term upside for the broader sector could be substantially larger than most investors currently imagine.

Importantly, I don’t think Lilly will be the last major pharmaceutical company knocking on these doors.

If psychedelic therapies continue producing successful Phase 3 data, larger drugmakers will increasingly face a choice. Either spend years and billions attempting to build internal psychedelic programs...

...or simply acquire companies that have already done the difficult clinical work.

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History suggests acquisitions usually become the preferred option.

Large pharmaceutical companies routinely buy innovation rather than inventing everything themselves. Oncology, gene therapy, obesity drugs and biotechnology more broadly have all gone through similar acquisition waves as promising clinical data accumulated.

There’s little reason to believe psychedelics will prove different.

In fact, the economics may become even more compelling. Many of these companies still carry relatively modest market capitalizations despite owning potentially valuable intellectual property and late-stage assets. For a pharmaceutical company generating tens of billions in annual revenue, paying several billion dollars for a differentiated neuroscience platform may ultimately prove inexpensive if these treatments become standard of care.

That’s exactly why I’ve been saying for more than a year that investors shouldn’t think only about FDA approvals. They should think about strategic value.

Clinical success doesn’t just create future revenue, it creates scarcity. And scarcity is exactly what fuels acquisition premiums. I’ve long believed the market was dramatically underestimating this possibility.

Today’s Lilly-AtaiBeckley news doesn’t prove the entire thesis. But it certainly looks like the first major piece of evidence that the industry’s next phase has arrived.

If anything, I think the acquisition race is only beginning. As more late-stage trial results emerge, more regulatory milestones are reached and institutional acceptance continues expanding, I expect the list of potential buyers to grow rather than shrink.

For years, psychedelic investing has been on the fence. Lilly just legitimized it. And my readers we were at the party first.

---

QTR’s Disclaimer: Please read my full legal disclaimer on my About page here. This post represents my opinions only. In addition, please understand I am an idiot and often get things wrong and lose money. I may own or transact in any names mentioned in this piece at any time without warning. Contributor posts and aggregated posts have been hand selected by me, have not been fact checked and are the opinions of their authors. They are either submitted to QTR by their author, reprinted under a Creative Commons license with my best effort to uphold what the license asks, or with the permission of the author.

This is not a recommendation to buy or sell any stocks or securities, just my opinions. I often lose money on positions I trade/invest in. I may add any name mentioned in this article and sell any name mentioned in this piece at any time, without further warning. None of this is a solicitation to buy or sell securities. I may or may not own names I write about and are watching. Sometimes I’m bullish without owning things, sometimes I’m bearish and do own things. Just assume my positions could be exactly the opposite of what you think they are just in case. If I’m long I could quickly be short and vice versa. I won’t update my positions.

As of May 20, 2026 I personally no longer actively trade (read my story here). My investing/saving is done by recurring contributions mostly to sector ETFs and a few select equities, trusted third parties who oversee my accounts, and advisors. Such advisors or funds, through individual equities, options, index funds, mutual funds, ETFs, or other securities, may have positions in, exposure to, or holdings of names mentioned herein that I know nothing about. Basically, via index funds, ETFs and individual equities it is possible I could own, have exposure to, or not own anything at any point. As of the same date, May 20, 2026, in an attempt to lead a healthier lifestyle, I’ve also excluded myself from fantasy sports, sports betting, online and in-person casinos and prediction markets.

And all positions can change immediately as soon as I publish this, with or without notice and at any point I can be long, short or neutral on any position. You are on your own. Do not make decisions based on my blog. I exist on the fringe. If you see numbers and calculations of any sort, assume they are wrong and double check them. I failed Algebra in 8th grade and topped off my high school math accolades by getting a D- in remedial Calculus my senior year, before becoming an English major in college so I could bullshit my way through things easier.

The publisher does not guarantee the accuracy or completeness of the information provided in this page. These are not the opinions of any of my employers, partners, or associates. I did my best to be honest about my disclosures but can’t guarantee I am right; I write these posts after a couple beers sometimes. I edit after my posts are published because I’m impatient and lazy, so if you see a typo, check back in a half hour. Also, I just straight up get shit wrong a lot. I mention it twice because it’s that important.

Tyler Durden Thu, 07/16/2026 - 08:05
Tyler Durden

zero rss