Morning Brew July 30 2026

Good morning.

Month-end arrives with markets very much at the mercy of central banks, inflation data, earnings and geopolitics. The Fed held rates steady again, but Kevin Warsh gave investors very little guidance beyond a firm promise that the central bank “will not waver” on inflation. That sounds hawkish, but without action it left markets with more questions than answers.

The only way yesterday’s decision becomes easier to understand is if today’s U.S. PCE number comes in softer than expected. If it does not, the market will again ask why a Fed that says inflation is too high is still choosing to wait.

Key things to watch:

The Fed is talking tough but still not acting. Rates were left at 3.50%–3.75% for a fifth consecutive meeting, with three officials voting for a hike. That keeps a September move alive, but the lack of clear guidance means today’s inflation data matters even more.

Long-end yields are doing the tightening for the Fed. The U.S. 10-year yield is around 4.70% and the 30-year is above 5.20%, the highest levels since 2007. That is a direct headwind for expensive growth, AI infrastructure and anything dependent on cheap financing.

Big Tech is no longer one simple trade. Microsoft reassured investors with strong Azure growth and a capex message the market could live with. Meta showed the other side of the AI buildout, with free cash flow collapsing as investment needs keep rising. Tonight, Apple and Amazon have to prove which side of that divide they are on.

U.S. equities had their worst Fed-day performance since December 2024. The S&P 500 fell 1.5%, the Dow dropped 2.2%, and the Nasdaq 100 declined 2.1%, pushing it deeper into correction territory. Semiconductors remained the weak spot, with the Philadelphia Semiconductor Index down 5.3%. Nvidia lost 3.6%, Lennox International plunged 21% after disappointing results, and Micron extended its recent slide.

Europe was calmer at the index level, but not under the surface. The Stoxx 600 slipped 0.3%, the Euro Stoxx 50 fell 0.65%, and the DAX was little changed around 25,460. The FTSE 100 outperformed, rising 0.3% and briefly touching a new intraday record, helped by Shell and Sage. Luxury was more dramatic: Hermès fell 11% on disappointing leather-goods sales, while Kering surged 17% on stronger Gucci numbers. ASM International and Infineon also weighed on the technology side.

This morning, U.S. futures look a little friendlier, but the recovery is fragile. Korea’s KOSPI is still under pressure, down around 1.5%, which keeps Asia and the semiconductor complex firmly on the watchlist.

In FX, the dollar is not getting much trust despite the higher yield backdrop. The USD Index is around 100.90. EUR/USD has risen to 1.1450, GBP/USD is around 1.3350, and USD/JPY remains very stretched near 163.50. At these levels, the yen remains one headline away from intervention risk returning to the front page.

On the company side, Microsoft delivered what the market wanted to hear. Revenue rose 18% to about USD 90 billion, earnings beat expectations, Azure growth came in clearly ahead of estimates, and management said capital spending plans remain broadly unchanged. The key message was simple: Microsoft is still spending heavily on AI, but investors can see the revenue pipeline and cash generation.

Meta told a different story. Revenue growth was strong at 28%, and daily active people rose again, but free cash flow dropped sharply as AI capex absorbed more of the business. The lower end of the 2026 capex outlook was raised, and the stock initially fell heavily after hours before recovering part of the move. The market is not rejecting AI spending outright; it is asking who can fund it without damaging cash flow.

That is the important difference this earnings season. An AI story with visible revenue, backlog and cash flow is still being rewarded. An AI story that mainly shows higher capex and lower free cash flow is being questioned much more aggressively.

Geopolitics are back as a second major risk driver. The U.S. carried out fresh strikes in Iran after attempted Iranian attacks on U.S. forces in the region. A U.S.-owned gas storage tanker was also reportedly hit by a drone at Egypt’s Damietta port, while U.S. and Saudi forces struck Iran-aligned groups in Iraq. The conflict is again expanding rather than narrowing.

Oil reacted immediately. The earlier relief from the temporary pause in strikes has faded, and Brent moved back above USD 90 as markets priced in a higher risk premium. For inflation and central banks, this matters. Lower oil would have made today’s PCE print easier to digest. A renewed oil spike does the opposite.

Today’s calendar is therefore unusually important. We get German GDP and CPI, euro-area GDP, unemployment and sentiment data, and U.S. GDP and PCE. The Bank of England also decides on rates, while earnings from Apple, Amazon, Mastercard, Shell, Sanofi and several major European companies add another layer of potential volatility.

The outlook is straightforward. If U.S. PCE is softer than expected, Microsoft’s strong numbers and slightly firmer futures can help markets stabilise. If inflation stays sticky, oil keeps rising, or Apple and Amazon disappoint tonight, the pressure on semiconductors, long-duration growth and highly valued AI infrastructure names can continue. The market is not giving up on AI, but it is becoming much less forgiving about the funding bill.

Trade carefully. Month-end, central banks, inflation and geopolitics are not a friendly combination for large position sizes.

Thursday, July 30, 2026
Macro: German GDP and CPI; euro-area GDP, unemployment and sentiment indicators; U.S. GDP and PCE data.
Central banks / speakers: Bank of England rate decision.
Corporate earnings: Apple, Amazon, Mastercard, Shell, Anheuser-Busch InBev, Sanofi, Cigna, Valero Energy, BMW, Adidas, Symrise, Heidelberg Materials, Drägerwerk, MTU, Aixtron, ZF, Kion, Gerresheimer, Knorr-Bremse, Saint-Gobain, Société Générale, Schneider Electric, Veolia, Air France-KLM, Renault, Ferrari, Enel, Prada, ING, BBVA, Stellantis, Rolls-Royce and BAE Systems.

Friday, July 31, 2026
Macro: China PMI; euro-area CPI; U.S. University of Michigan Consumer Sentiment.
Central banks / speakers: Bank of Japan rate decision.