Morning Brew July 1 2026

Good morning.

Key things to watch:

• Q3 off to a nervous start on middle East
• Gold and Silver cannot hold gains
• Yen at 40 Year Lows
• Dow enters Q3 at highs

U.S. 10-year yields have moved off their recent lows to 4.346%, while FX remains relatively stable but still important. EUR/USD is around 1.14, GBP/USD at 1.3240, and the yen remains weak at 162.70. Gold is trading below 4,000, while silver has retreated to 57.60 after briefly trading above 60 yesterday.

Germany’s inflation slowed to 2.3% year-on-year in June from 2.6% in May. The euro-area inflation print is due at 11:00 and will be watched closely after the ECB’s softer tone.

Geopolitics remain in focus after Iran said it would not meet with senior U.S. envoys who travelled to the region following the latest outbreak of hostilities. That clouds the prospects for a lasting peace agreement and keeps the market sensitive to fresh headlines from the Middle East.

U.S. politics also remain noisy. Donald Trump reported more than $1.4 billion in income from his family’s crypto ventures last year, underlining how digital assets have become a major source of income for him and a beneficiary of his policy stance.

The U.S. Supreme Court also dealt Trump a setback by rejecting his move to restrict birthright citizenship, adding another political headline to an already busy backdrop.

On the macro side, the U.S. JOLTS report was stronger than expected. Job openings rose to 7.59 million in May, a two-year high and well above the 7.30 million forecast. The data point supports the view that the U.S. labour market remains resilient, which does not make the Fed’s job easier.

Equities ended the quarter on a strong note. The S&P 500 rose 0.8% to 7,499.36 on Tuesday, the Nasdaq 100 jumped 1.7%, and the Dow gained 0.3% to 52,319.20. All three major U.S. indices capped their best quarter since 2020, helped by resilient earnings, AI momentum, and continued confidence in risk assets.

Asia also finished the quarter in impressive form. The MSCI Asia Pacific Index rose 21% over Q2, marking its best quarter in nearly 17 years. Japan’s Nikkei 225 added 0.9% to 70,062.32 on Tuesday, posting its biggest-ever quarterly advance, with futures pointing to further gains at the open. South Korea’s Kospi rose 1% to 8,476.48, led by Samsung Electronics, and recorded its best quarter since 1998. TSMC also gained in Taipei after Morgan Stanley raised its price target.

Europe joined the positive tone. The Stoxx 600 gained 0.9% to a record 641.73 and capped its best quarter since 2020. The DAX rose 1.5% to 24,995.81, the Euro Stoxx 50 finished Q2 up 13.6%, and the CAC 40 closed the quarter 7.5% higher. ASML surged 6.8% and led the technology subindex, while Abivax jumped 38.7% on strong clinical trial results. Kering was weaker after analysts turned more cautious ahead of its first-half report.

John wrote the outlook for Traders this Quarter, Charu focused on Investors – here the links and highlights:

Q3 Outlook for Traders:   AI’s challenging growth math and a new era at the Fed

Late Q2 saw a strong comeback in AI stocks, chiefly in the semiconductor and other hardware names that are most clearly “enjoying” or absorbing the spending from the staggering pace of capital expenditures to build out data center capacity. The coming quarter or two could see a slowing of these AI-linked hardware stocks as the market may question how far into the future projected growth rates can continue. Overall, this could mean a choppy equity market. Elsewhere, our focus in this quarterly outlook is on the new era set to begin at the Fed as Fed Chair Kevin Warsh has now taken charge and whether critical minerals and other commodities continue to represent an area of opportunity for traders.

Outlook for Investors: Keep the future, hedge the crowd

• AI remains structural, but it is no longer one simple trade: Investors should stay exposed, but separate AI builders, users and efficiency winners because each faces different risks from capex, pricing, funding costs and proof of monetisation.
• Lower oil prices may bring relief, but the Fed is still constrained: A US–Iran peace framework could ease inflation pressure, but sticky services, wages, tariffs and fiscal spending mean investors should still prioritise pricing power, cash flow and balance-sheet strength.
• Concentration is becoming the hidden portfolio risk: Market-cap indices have worked well, but they increasingly embed exposure to AI, mega-cap growth and momentum. Equal weight, quality defensives, income and energy/power infrastructure can help broaden the portfolio without abandoning long-term growth.

Remain extremely cautious as we head into a data-heavy stretch, with euro-area inflation due today, U.S. Nonfarm Payrolls tomorrow, and a long U.S. weekend likely to bring position adjustments.

• Wednesday, July 1, 2026
  EU Inflation, Global Manufacturing PMI, U.S. ISM Manufacturing PMI, U.S. Construction Spending, ADP Employment Report
• Thursday, July 2, 2026
  U.S. Nonfarm Payrolls, Unemployment Rate, Average Hourly Earnings, Initial Jobless Claims, Factory Orders; U.S. bond market early close ahead of Independence Day
• Friday, July 3, 2026
  U.S. Independence Day observed — U.S. equity markets closed; liquidity likely thin in Europe Erik leaves on Holiday