The US stock indices started the week on a downbeat note. By the end of the day, the Dow Jones Index (US30) fell by 0.59%. The S&P 500 index (US500) declined by 0.19%. The tech‑heavy Nasdaq (US100) closed Monday in the red at 0.05%. Rising energy prices pushed Treasury yields higher, as market participants began pricing in a more likely Fed rate hike by year‑end due to inflation risks. As a result, traditional sectors came under pressure, including banking – where JPMorgan and Bank of America ended the session lower – as well as the industrial segment represented by Applied Materials. Against this backdrop, the technology sector, especially semiconductor manufacturers, showed signs of recovery after the recent sell‑off. Investors appear to be reassessing expectations regarding hyperscalers’ spending on AI infrastructure, allowing shares of Broadcom, Micron, AMD, and Intel to close higher. Notably, Alphabet shares rose 1.5% ahead of Wednesday’s important corporate‑guidance update, which could set the tone for the entire tech sector for the rest of the week.

The Canadian dollar (CAD) weakened to 1.41 per US dollar, correcting after recently reaching a one‑month high. The key pressure factor was the June inflation report, which showed annual inflation slowing to 2.8% from May’s 3.2%, below market expectations of 2.9%. The main contributor to this decline was slower fuel‑price growth, while core inflation indicators – the metrics closely watched by the Bank of Canada – fell to a five‑year low.

European indices closed Monday without a unified trend. By the end of the day, Germany’s DAX (DE40) rose by 0.06%, France’s CAC 40 (FR40) closed up 0.02%, Spain’s IBEX 35 (ES35) fell by 0.05%, and the UK’s FTSE 100 (UK100) closed down 0.71%. The main restraining factor remains rising geopolitical tension: the blockade of the Strait of Hormuz for LNG tankers triggered a new spike in natural‑gas prices in Europe, reigniting inflation concerns and forcing investors to revise ECB rate‑path expectations toward tightening. The most severe blow was taken by Ryanair, whose shares plunged 5.2% after the sharp rise in jet‑fuel prices negatively affected quarterly profit metrics, highlighting the airline’s direct vulnerability to the current energy crisis.

The oil market remains tense: prices WTI are holding at a five‑week high around $82 per barrel, as investors attempt to assess the reliability of diplomatic initiatives amid real threats to supply chains. Despite reports of a possible 10‑day ceasefire between the US and Iran, the market continues to react sharply to the Houthi‑initiated shipping blockade and actual disruptions to transportation through the Strait of Hormuz, preventing prices from declining significantly.
On Monday, Japan’s Nikkei 225 (JP225) was closed, China’s FTSE China A50 rose by 2.60%, Hong Kong’s Hang Seng (HK50) gained 2.36%, and Australia’s ASX 200 (AU200) closed down 0.06%.

The Australian dollar (AUD) strengthened to a four‑week high near $0.70, supported by global growth in energy‑related risks. The ongoing tenth consecutive day of conflict between the US and Iran, as well as the Houthi‑announced maritime embargo against Saudi Arabia, triggered a spike in oil prices. Amid the threat of large‑scale disruptions to energy supplies, inflation concerns intensified, prompting markets to price in an 80% probability of another rate hike by the Reserve Bank of Australia (RBA) by December, in addition to the already completed three‑step tightening cycle to 4.35%.

The New Zealand dollar (NZD) strengthened to $0.586, holding near a seven‑week high amid strong domestic data. Annual inflation in Q2 accelerated to 4.1%, exceeding both market projections and the expectations of the Reserve Bank of New Zealand (RBNZ), and significantly surpassing the target range of 1-3%. This reading was the highest since late 2023 and confirmed the need for further measures to cool the economy. In response to the inflation spike, swap markets are pricing in the inevitability of a rate hike in September, and also expecting additional tightening in October, December, and February next year.