EU Market Open: Stocks mostly firmer after Fed hold and MSFT beat; BoE set to keep rates unchanged

Fed maintained rates, though with 3 dissenters who favoured a 25bps hike. Chair Warsh said that if inflation remains elevated, rates could be part of fixing that.
DXY came under pressure as the Fed failed to match hawkish expectations, though Warsh's press conference triggered pronounced UST curve steepening.
US CENTCOM announced its forces successfully completed a heavy wave of strikes against Iran; Jordan intercepted five missiles launched by Iran.
US after-market earnings saw results from ARM Holdings (-5.7%), Microsoft (+8.9%), Meta Platforms (-7.5%) and QUALCOMM (-4.7%).
APAC stocks were mostly lower; European equity futures indicate a flat cash market open.
Looking ahead, highlights include French GDP Prelim (Q2), Spanish GDP Flash (Q2), Inflation Prelim (Jul), German GDP Flash (Q2), State/Nationwide Inflation Flash (Jul), Italian GDP (Q2), EU GDP Flash (Q2), Consumer Confidence Final (Jul), US GDP Advance (Q2), PCE (Jun), Initial Jobless Claims (Jul/25), Personal Spending (Jun), Chicago Fed Labor Market Indicators (Jul), BoE Policy Announcement & MPR (Jul). Speakers include BoE Governor Bailey, Earnings from Bristol Myers Squibb, Mastercard, Apple, Amazon, Adidas, BMW, Leonardo, Renault, Sanofi, Schneider Electric, SocGen, BAE Systems, British American Tobacco, Shell & Rolls-Royce.

SNAPSHOT

Click for the Newsquawk Week Ahead.

IRAN CONFLICT

US President Trump said he was briefed on the Egypt incident and will hit Iran hard, while he added it's our turn now and that Iran is asking us not to hit them. Trump also commented that he would like Iran tariffs in the Russia sanctions bill, while he said they've hit Iran very hard and will finish off Iran pretty soon.
US CENTCOM announced its forces successfully completed a heavy wave of strikes against Iran, in response to the prior day's attempted missile attacks on US forces, while they struck dozens of Islamic IRGC targets in Iran, including military command centres, missile and drone facilities, coastal surveillance and defence sites, and maritime capabilities.
US CENTCOM commander Cooper proposed a 2-week plan to escalate strikes in Iran, according to WSJ.
US source said the overnight strike was extensive and had a significant impact, while it was about twice as large in intensity and scope as previous operations, according to i24's Stein.
Arab sources reported that explosions were heard in Jordan, according to Nour News. It was later reported that Jordan intercepted five missiles launched by Iran and said there were no casualties, according to local media.
A US-owned and operated, Marshall Islands-flagged LNG floating storage facility was struck by at least one UAV while at Egypt's Mediterranean port of Damietta, according to Ambrey.
Riyadh Airport suspended activities after reports of two explosions heard in Saudi Arabia's capital.
Saudi Arabia is seeking to build an international coalition to protect Red Sea shipping from Houthi attacks, according to reports, citing sources.
Israel reportedly conducted an airstrike on Gaza City, according to Al Araby.

FOMC

Fed left rates unchanged at 3.50-3.75%, as expected. However, the meeting produced three dissenting votes, with regional Fed Presidents Logan, Hammack and Kashkari all preferring a 25bps rate hike. The remainder of the statement was largely unchanged from June, continuing to provide no explicit forward guidance. The Committee also reiterated that "The Committee will deliver price stability". The Fed's assessment of the economy was also maintained. The statement continued to note that "Economic activity is expanding at a solid pace", while adding that "Productivity growth and capital investment are strong. Job gains have kept pace with the workforce, and the unemployment rate has changed little."
Fed Chair Warsh said the discussion was collegial and that there is no soft inflation target, as well as stated the economy is showing impressive resilience even with recent shocks, while trends are positive, and reveal solid growth. Warsh said the 5-plus years of inflation above target cannot be cured in 9 weeks, or by a single month of modest price decreases, but stated the Fed will not waver and that one key development has been that nominal and real yields are materially higher across the Treasury curve. Furthermore, he stated that where necessary and appropriate, they will not hesitate to act.
Fed Chair Warsh said in the Q&A that they had a good family fight, and there was a lot of agreement that they can deliver stable prices, while he responded "not much" and that they are not relying on one individual piece of data when asked how much was not hiking in July due to June core CPI. Warsh stated in the period ahead, they have important decisions to make about the policy rate and will continue to watch market information to see how it responds and how it can help the Fed inform their decision-making. Warsh also commented that if inflation continues to be elevated through the forecast period, interest rates could well be part of fixing that, while they will not tolerate a higher inflation target and will deliver price stability. Furthermore, when asked about Jackson Hole being a reset for policy, Warsh said he looks at it like a blank piece of paper right now and would like it to frame the big questions, while he will be checking with task forces before Jackson Hole.

US TRADE

EQUITIES

US stocks sold off, weighed by a combination of continued weakness in the AI trade and heightened volatility surrounding the FOMC. As expected, the Fed left rates unchanged, although the decision saw a 9-3 vote split, with Logan, Hammack and Kashkari preferring a 25bp rate hike. The absence of a hike, versus roughly a one-third probability priced before the meeting, initially sparked a dovish reaction across asset classes. However, the moves in equities, gold and the 10-year Treasury quickly reversed during Warsh's press conference. Warsh largely reiterated his commitment to restoring price stability, continued to avoid providing forward guidance and downplayed the significance of the June CPI report in the policy decision. The most notable market reaction came in the Treasury market, where the curve underwent a pronounced steepening, led by the long-end, likely reflecting investors demanding greater term premium amid the continued absence of forward guidance. Following the meeting, money markets pushed back expectations for further tightening, with a 25bp hike no longer fully priced by year-end.
SPX -1.52% at 7,316, NDX -2.06% at 27,192, DJI -2.19% at 51,599, RUT -1.61% at 2,906.
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TARIFFS/TRADE

US lawmakers sent a letter to Apple (AAPL) CEO Cook regarding China memory and warned Apple not to buy memory chips from Chinese firms.
China's MOFCOM said regarding the US robot ban that measures discriminate against and suppress Chinese companies and products, while it added that the FCC has ignored China's repeated negotiations and restrained attitude, continuously introducing and escalating restrictions. Furthermore, it urged the US to immediately withdraw relevant measures and stop erroneous actions, as well as warned that if the US insists on acting unilaterally, China will resolutely retaliate and safeguard its legitimate rights and interests.
Canada's US Trade Minister said he had a comprehensive meeting with USTR Greer and agreed to stay in close contact.

NOTABLE HEADLINES

US President Trump said Fed Chair Warsh is brilliant, while he added that Warsh has a board, and it is a political one. Furthermore, Trump said Warsh would love to see lower interest rates.

NOTABLE EARNINGS

ARM Holdings (ARM) Q1 2027 (USD): Adj. EPS 0.45 (exp. 0.40), Revenue 1.29bln (exp. 1.26bln). Shares fell 5.7%.
Microsoft (MSFT) Q4 2026 (USD): Adj. EPS 4.74 (exp. 4.24), Revenue 90bln (exp. 87.62bln). Shares rose 8.9%.
Meta Platforms Inc (META) Q2 2026 (USD): EPS 6.18 (exp. 7.19), Revenue 60.8bln (exp. 60.22bln). Shares fell 7.5%.
QUALCOMM (QCOM) Q3 2026 (USD): Adj. EPS 2.21 (exp. 2.23), Revenue 9.95bln (exp. 9.68bln). Q4 adj. EPS view 2.05-2.25 (exp. 2.36) Shares fell 4.7%.

APAC TRADE

EQUITIES

APAC stocks were mostly lower in somewhat mixed trade as participants reflected on the FOMC and mega-cap earnings, while geopolitics was also in focus after the US conducted retaliatory strikes on Iran.
ASX 200 traded lower with gold miners and the consumer sectors leading the declines, although downside was stemmed by resilience in tech,
Nikkei 225 was positive with tech stocks front-running the advances in the index, while participants also look ahead to the BoJ, which began its two-day conclave and is expected to pause after hiking rates at the last meeting.
KOSPI swung between gains and losses despite early momentum driven by Samsung Electronics earnings.
Hang Seng and Shanghai Comp were subdued with Hong Kong range-bound after the HKMA kept rates unchanged in lockstep with the Fed, while the mainland was pressured amid ongoing US-China frictions, with MOFCOM criticising the US robot ban and threatening to retaliate if the US insists on acting unilaterally.
US equity futures nursed some of the post-FOMC losses but with the rebound contained as participants also digested mixed earnings results from the likes of Microsoft and Meta.
European equity futures indicate a flat cash market open with Euro Stoxx 50 futures unchanged after the cash market closed with losses of 0.7% on Wednesday.

FX

DXY got some slight reprieve after weakening yesterday in the wake of the FOMC meeting, which failed to match hawkish expectations. The decision to hold rates was widely expected, although three members opted for a 25bps rate hike, while a dovish reaction was seen post-rate decision in a likely unwinding of hawkish bets given that money markets were pricing in around a 33% chance of a 25bps hike prior to the confab. The statement was left alone, with no forward guidance, as was expected. Warsh stuck to his usual tone, giving no forward guidance, reiterating commitment to the 2% target, while he noted the decision not to hike was not much influenced by the June core CPI reading.
EUR/USD took a breather after rallying back above the 1.1400 level on the back of the post-FOMC dollar pressure, while there is a slew of GDP data releases from the EU scheduled today.
GBP/USD faded some of its recent spoils but with the reversal limited as the attention turns to the BoE meeting.
USD/JPY was choppy after recent fluctuations within the 163.00 handle, and with the BoJ due tomorrow.
Antipodeans held on to yesterday's spoils and with mild support overnight amid encouraging Australian Building Approvals and New Zealand Business Confidence.
PBoC set USD/CNY mid-point at 6.7892 vs exp. 6.7530 (prev. 6.7899)
BoC Minutes stated some members were split over the sustainability of the rebound, while some members were concerned about signs of an upward drift in medium-term inflation expectations, although all agreed longer-term inflation expectations remained well anchored. Furthermore, members agreed to reiterate in their communications that they would not allow higher oil prices to lead to persistent inflation.

FIXED INCOME

10yr UST futures remained subdued after the fluctuations and pronounced steepening seen in the aftermath of the FOMC, where the Fed left rates unchanged, as expected, although the decision saw three dissenters—Logan, Hammack and Kashkari—who all preferred a 25bps rate hike. The statement itself generated a dovish market reaction, with front-end Treasury yields initially falling as participants unwound hawkish positioning built ahead of the meeting, with money markets having priced around a 33% probability of a hike. However, Fed Chair Warsh's press conference ultimately triggered a pronounced steepening of the Treasury curve, led by the long-end and longer-dated maturities sold off sharply, with the 30-year yield briefly rising above 5.20%, its highest level since 2007.
Bund futures extended beneath the previous day's trough after retreating throughout most of the prior day as oil climbed and amid supply, while participants await GDP data from across the bloc.
10yr JGB futures tracked downside in global counterparts and with further pressure seen after a weaker 2yr auction, while the BoJ also kick-starts its 2-day policy meeting.

COMMODITIES

Crude futures initially pulled back overnight following the prior day's rally and despite the US conducting strikes on Iran, as President Trump had warned that they would hit Iran hard in response to attacks targeting the US base in Jordan. Crude futures then turned flat as European players entered the fray.
US President Trump said UK PM Burnham told him he would open the North Sea for oil.
Spot gold was choppy with a lack of conviction following the post-FOMC whipsawing.
Copper futures climbed higher overnight and revisited the highs seen following the initial dovish reaction to the FOMC, where it met some resistance.

CRYPTO

Bitcoin eked slight gains in two-way price action on both sides of the USD 64,000 level.

NOTABLE ASIA-PAC HEADLINES

HKMA kept rates unchanged at 4.00%, as expected, following the US Fed.

DATA RECAP

Australian Building Permits MM Prel (Jun) M/M 7.2% vs. Exp. -0.5% (Prev. -1.1%)
Australian Export Prices QoQ (Q2) Q/Q 1.1% (Prev. 0.5%)
Australian Import Prices QoQ (Q2) Q/Q 5.7% vs. Exp. 0.0% (Prev. 0.1%)
New Zealand ANZ Business Confidence (Jul) 56.1 (Prev. 36.6)
New Zealand ANZ Activity Outlook (Jul) 49.3 (Prev. 36.9)

GEOPOLITICS

RUSSIA-UKRAINE

Heavy explosions were reported in Ukraine's capital of Kyiv and in other areas including Lviv as Russia launched ballistic missiles, while Poland scrambled fighter jets amid Russian airstrikes on Ukraine.

EU/UK

NOTABLE HEADLINES

UK Business Secretary Reynolds argues against the UK rejoining the EU customs union and said that Labour’s 2024 manifesto position, which rules out a return to the single market, the customs union or freedom of movement, is correct, according to FT.