EUROPEAN OPEN: ERICB SS Q2 revenue misses; BP/ LN guides lower Q2 upstream production; HLAG GY raises FY EBITDA outlook; WOSG LN FY26 revenue beats, affirms FY27 outlook; EVT GY cuts FY sales outlook after H1 miss

EUROPEAN OPEN:

• European equities start in the red, as the US-Iran conflict escalates, sending crude prices and bond yields higher. APAC stocks were mostly in the red, driven by geopolitics and a tech sell-off, though SK Hynix shares managed to recover from a drop of almost 9% in Seoul.
• US CENTCOM said the US conducted a third consecutive night of strikes against Iran, hitting targets in Bushehr, Bandar Abbas and Bandar Kangan, with explosions also reported on Qeshm Island and Kish Island. The US Navy-led JMIC announced enforcement of a naval blockade of all Iranian ports and coastal areas, applying to all vessel traffic regardless of flag. Trump described the conflict as “going well and fast”, adding that the US would hit “Pickaxe Mountain” soon. Iran’s IRGC struck US military facilities at Bahrain’s Juffair base and in Kuwait with drones, targeted a US vessel with cruise missiles, and a US military base in Jordan was also reported hit. Iran’s Foreign Minister said Iran will remain guardian of the Strait of Hormuz.
• Crude futures continue higher, with Brent trading above USD 85/bbl as Europe gets underway, following President Trump reinstating the US blockade of Iranian ships transiting the Strait of Hormuz, and announced a 20% protection fee on all other cargo shipped through the waterway.
• The escalation reignited inflation concerns, and boosted Fed rate hike bets ahead of US CPI data and testimony from Fed Chair Warsh, both due today. The pricing shift was also supported by remarks from Fed Governor Waller, who on Monday said that a near-term hike should be considered if June CPI shows another hot core reading.
• Gold is trading higher following two days of losses, which were driven by Middle East tensions, higher energy costs and rising US rate hike expectations, with bullion starting the European day around USD 4,030/oz, regaining the 4-handle after drop beneath the level yesterday.
• In data, German wholesale prices declined by -0.7% M/M in June (exp. 0.2%), and the annual rate fell to 4.9% Y/Y (prev. 5.9%).
• UK BRC retail sales monitor rose 1.7% Y/Y in June (exp. 2.9%, prev. 3.4%); the monthly gauge was up for a second straight month. Meanwhile, UK card spending rose 1.9% Y/Y, the fastest in 11 months, according to Barclays data, boosted by the World Cup and warm weather driving spending; still, Barclays said the economy likely slowed through mid-2026, with only a modest pick-up seen in H2.
• Rachel Reeves will likely defend fiscal rules and warn that growth plans require market credibility in her final Mansion House speech as Chancellor today; she will outline bank ring-fencing reforms and an AI strategy for financial services. She is expected to be replaced when incoming PM Andy Burnham announces his new cabinet line-up; according to a Bloomberg poll, Ed Miliband was viewed as the least market-friendly potential UK chancellor, receiving 5% support in a survey of 187 market participants (conducted from 2-13th July), while Wes Streeting led with 34%, ahead of John Healey.
• Ahead, testimony from Fed Chair Warsh, US inflation data for June, and bank earnings are the key focus, as well as ongoing geopolitical developments (see below for previews).

STOCK SPECIFICS:

• TECH: Overnight, SK Hynix (000660 KS) shares pared an early drop of as much as 9% before printing gains in excess of 4%, a dramatic intraday reversal that would have pushed its two-day loss beyond 20% had the decline held. Ericsson (ERICB SS) reported Q2 revenue of SEK 52.7bln (exp. SEK 53.9bln), EBIT of SEK 5.92bln (exp. SEK 5.96bln), adj. EBITA of SEK 6.88bln (exp. SEK 6.82bln), and net income of SEK 4.08bln (exp. SEK 4.43bln). Q3 adj. gross margin is guided at between 48-50%, with some Networks margin pressure expected from higher network rollout volumes. Outgoing CEO Ekholm cited increased macro and geopolitical uncertainty in the outlook.
• ENERGY: BP (BP/ LN) expects Q2 upstream production to fall, in line with previous guidance, partly due to Middle East disruption; Oil trading results are expected to be slightly higher vs Q1, when BP reported exceptionally strong trading. It sees Q2 upstream production of 2,170-2,220mboepd (prev. 2,339mboepd Q/Q), with the decline attributed to seasonal maintenance in the Gulf of America and Middle East disruption; gas and low carbon energy is guided between 750-770mboepd (prev. 798mboepd); oil production seen between 1,420-1,450mboepd (prev. 1,541mboepd). Net debt is expected at USD 22-23bln (prev. USD 25.3bln Q/Q).
• INDUSTRIALS: Hapag-Lloyd (HLAG GY) raised its FY EBITDA view to USD 2.7-3.7bln (from USD 1.1-3.1bln), citing strong demand and freight rates, Reuters reports. It also lifted FY EBIT guidance to USD 100mln-1.1bln, while warning of uncertainty from rate volatility and geopolitical challenges.
• CONSUMER: Of note for tobacco stocks, Germany’s Finance Ministry is reportedly planning to raise to price of a pack of cigarettes to around EUR 11.80 by 2028, higher than the previously planned EUR 11.40. Watches of Switzerland (WOSG LN) reported FY26 revenue of GBP 1.83bln (exp. GBP 1.78bln), adj. EBIT of GBP 155mln (exp. GBP 148.4mln) and operating profit of GBP 170mln (prev. GBP 150mln YoY), and it affirmed its FY27 outlook; CEO cited an encouraging start to the year, underpinning confidence in another year of strong revenue growth.
• REAL ESTATE: British Land (BLND LN) said it started FY27 well, with momentum continuing from the previous year and demand exceeding supply across campuses and retail parks; leasing remains above previous passing rents, forward indicators support continued favourable conditions, and it maintained its FY27 outlook.
• HEALTHCARE: Evotec (EVT GY) reported H1 Revenue of EUR 300.1mln (exp. 365.4mln), and it sees FY sales between 570-610mln (exp. 730.2mln, prev. saw 595-635mln). AstraZeneca (AZN LN) entered an exclusive licence agreement with Dizal Pharmaceutical for worldwide development and commercialisation rights to Zegfrovy, an oral irreversible EGFR inhibitor for lung cancer; AZ will pay USD 600mln upfront, with additional payments of up to USD 900mln.
• NOTABLE BROKER UPDATES: Salzgitter (SZG GY) upgraded at Jefferies. Pearson (PSON LN) downgraded at JPMorgan; Commerzbank (CBK GY) downgraded at Autonomous Research; EssilorLuxottica (EL FP) downgraded at Goldman Sachs; Nokian Tyres (TYRES FH) downgraded at SEB; Zealand Pharma (ZEAL DC) downgraded at Jefferies. Buzzi (BZU IM) initiated with Hold at Jefferies. Santander initiated Anglo American (AAL LN), Glencore (GLEN LN) and Rio Tinto (RIO) with Outperform ratings.

DAY AHEAD:

• EVENTS: Testimony from Fed Chair Warsh, US inflation metrics, and bank earnings are the highlights today. US President Trump will meet with Iraq’s PM in Washington. UK Chancellor Reeves will deliver a speech at the Mansion House afterhours.
• DATA: In North America, US June CPI is expected to see the headline at -0.1% M/M (prev. 0.5%), and the annual rate falling to 3.8% Y/Y (prev. 4.2%); the core rate of CPI is seen rising 0.2% M/M (prev. 0.2%), and the annual core rate is seen unchanged at 2.9% Y/Y (prev. 2.9%). Elsewhere, the NFIB business optimism for June is due (prev. 95.3). Weekly ADP employment figures are also out today (prev. 21k).
• CENTRAL BANKS: Fed Chair Warsh testifies to the House (see below for preview); Fed’s Goolsbee (2027 voter, hawkish), Barr (voter, neutral), Cook (voter, neutral) and Bowman (voter, dovish) all speak; Fed Discount Rate minutes published. BoE Governor Bailey gives evidence to the Treasury Select Committee on the July FSR. ECB President Lagarde meets US Treasury Secretary Bessent.
• SUPPLY: Germany auctions EUR 6.0bln of 2028 debt; Netherlands auctions EUR 2.5-3.5bln of 2031 DSLs.
• ENERGY: API weekly energy inventories due after hours. US Energy Secretary Wright will deliver remarks after the US close.
• EARNINGS: Notable US corporates reporting today include: JPMorgan (JPM), Bank of America (BAC), Goldman Sachs (GS), Wells Fargo (WFC), Citigroup (C), Fastenal (FAST).
• PREVIEW - FED CHAIR WARSH (Text likely at 13:30BST/08:30EDT; testimony starts at 15:00BST/10:00EDT): Based on recent history, Warsh’ text is likely to be released at 08:30EDT/13:30BST, and he is scheduled to begin his testimony at 10:00EDT/15:00BST. Kevin Warsh will deliver his first semi-annual testimony as Fed Chair to the House on Tuesday, followed by his report to the Senate on Wednesday. The Fed has now kept rates between 3.50-3.75% for four straight meetings, and Warshʼs term begins amid a backdrop of sticky inflation, potential tariff pass-throughs, and energy supply shocks, which have stoked fears of further policy tightening. The Fedʼs June meeting minutes released this week showed that some officials support resuming hikes ahead; while traders will look to Warshʼs remarks for any explicit thresholds that could trigger a rate rise, Warsh has notoriously leaned against any forms of forward guidance. Speaking last week, Warsh reiterated the Fed will not provide it, describing it as an obstacle to healthy FOMC debate; he added that rates should be the primary monetary policy tool, and expressed hope that new tech can improve economic understanding within a period of 9-12 months. Warsh also said that the Fedʼs dot plot projections will continue, at least in the near term. On the balance sheet, Warsh reiterated his preference for a smaller size, though declined to specify any target size; he said any change would be well deliberated and communicated. Warsh will also be quizzed on the newly established external task forces reviewing policy areas. The Fed has announced five task forces to review and improve its monetary policy conduct; each will be co-led by external figures from business and economics, including former BCBʼs Arminio Fraga, former BoE chief Mervyn King, former RBI Governor Raghuram Rajan, former Fed Governor Jeremy Stein, and former BIS advisor William White. Ahead of Warsh’s testimony, Fed rate hike expectations for July rose sharply, with market-implied odds climbing to approximately 50%. The pricing shift followed remarks Fed Governor Waller, who on Monday said that a near-term hike should be considered if June CPI shows another hot core reading.
• PREVIEW - US CPI (13:30BST/08:30EDT): US June CPI is expected to see the headline at -0.1% M/M (prev. 0.5%), and the annual rate falling to 3.8% Y/Y (prev. 4.2%); the core rate of CPI is seen rising 0.2% M/M (prev. 0.2%), and the annual core rate is seen unchanged at 2.9% Y/Y (prev. 2.9%). The May inflation data was driven by higher energy prices, though core inflation remained contained, with analysts citing little evidence of secondary price effects feeding through to the broader basket. For June, however, the sharp decline in oil prices following the US-Iran MOU is expected to weigh on the headline, while analysts will continue to look for any signs of pass-through into other components. Analysts will use the CPI and PPI releases to model expectations for the June PCE data (due 30th July); in its June economic projections, the FOMC raised its view for headline PCE this year, forecasting 3.6% Y/Y (up from its prior view of 2.7%), though is expected to cool to 2.3% next year, before returning to target in 2028. Its core PCE view was revised up to 3.3% Y/Y for 2026 (from 2.7%), and is seen cooling to 2.5% next year, and 2.1% in 2028. The Cleveland Fedʼs inflation nowcasting models are tracking Juneʼs headline PCE at 3.88%, and the core measure at 3.43%.
• PREVIEW - BANK EARNINGS: US Big banks will begin reporting Q2 metrics today, with JPMorgan (JPM), BofA (BAC), Goldman Sachs (GS), Wells Fargo (WFC), and Citigroup (C) all due. FactSet says that Financials are expected to post 6.6% Y/Y earnings growth (this view has been revised up vs. 5.2% at the start of the quarter). IB revenue is seen up 26% Y/Y, largely supported by the SpaceX IPO, generating direct fees, debt-raising mandates, and soft-dollar income from hedge funds allocated shares in the oversubscribed deal; Goldman Sachs and Morgan Stanley (MS) are the primary beneficiaries. CNBC says trading gains were broad-based in the quarter: equity markets rose while the Iran conflict drove volatility in fixed income, rates, oil, and currencies, lifting FICC figures. Beyond Wall Street, commercial lending is flagged as a potential positive; AI-driven corporate capex is pulling borrowers back to banks and away from private credit, with regional lenders seen as disproportionate beneficiaries. Consumer credit remains clean, underpinned by low unemployment. Traders will note any key risks around private credit contagion (though near-term concern has faded), and deposit competition potentially pressuring net interest margins if banks are forced to pay up for funding. Analysts will also look to guidance from financials to judge the sustainability of any strong performance.