Launch Pad

Accounting grey area. A Nikkei study found that major tech companies are financing AI data centres through off-balance-sheet entities such as variable interest entities, allowing them to keep significant debt and lease obligations off their reported balance sheets while complying with current accounting rules. While these arrangements are legal and disclosed in financial statements, analysts estimate Alphabet, Microsoft, Amazon, Meta and Oracle collectively have roughly $1.65 trillion of off-balance-sheet obligations, exceeding their reported debt. Regulators, auditors, and credit agencies are now trying to examine whether or not these account practices accurately reflect the economic risks, especially as companies commit trillions of dollars to AI infrastructure with uncertain long-term returns. Investors are now looking beyond headline debt figures to footnote disclosures, as future lease commitments and financing obligations could begin to impact cash flows, leverage, and credit quality if AI demand falls short of expectations. 

European banks are expected to report another strong quarter, helped by higher interest rates, solid loan growth, and resilient trading and investment banking activity, although the results are likely to not be as strong compared to recent years. Investors will be watching management outlooks closely for signs that the Iran war or weakening European economies are beginning to pressure credit quality or loan demand. While the sector continues to benefit from improved profitability and remains one of Europe’s strongest-performing industries, analysts expect U.S. banks to maintain their lead in investment banking, with European lenders relying more heavily on traditional lending growth and operating efficiency to support earnings. 

The currency carry trade has been one of this year’s strongest-performing investment strategies, benefiting from resilient global growth, controlled market volatility, and stable major currencies, encouraging investors to borrow in low-yielding currencies such as the euro to invest in higher-yielding EM currencies. Major banks and asset managers remain constructive on the strategy, arguing it can continue to generate attractive returns while the Fed stays patient and volatility remains contained. Still, some have pointed out that carry trades remain vulnerable to sudden shifts in monetary policy or quick currency moves, particularly involving the yen or U.S. dollar, which could quickly reverse gains and trigger an unwinding of leveraged positions. 

Hazard pay? Growing security risks in the Strait of Hormuz are forcing shipping companies to offer huge financial incentives to crews willing to transit the waterway, Highlighting the growing disruption to global energy transportation. Attacks on commercial vessels have reduced shipping traffic and increased insurance and operating costs, while some crews continue to refuse voyages despite significant bonus payments. The deteriorating security environment highlights the potential for continued pressure on global oil supply chains and elevated energy prices if the conflict continues much longer. 

While the position of UK PM seems to be a revolving door, there is one resident of Downing Street that has been able to keep his job. Larry the cat, Downing Street’s longtime Chief Mouser, is hosting his 7th prime minister now that Andy Burnham took office. Larry has held his role for over 15 years now, making him one of Britain’s most enduring political fixtures. Adopted in 2011, Larry has outlasted multiple governments while becoming a familiar presence at official events, greeting world leaders, interacting with the public, and maintaining his reputation as both a rodent hunter and a symbol of continuity amid frequent political change. 

Grains are higher with wheat rising for a second session on escalating Black Sea tensions and worsening crop prospects. Most-active wheat futures in Chicago climbed nearly 1% as continued Russian and Ukrainian attacks fueled worries over exports from the Black Sea, a key shipping route for two of the world’s largest wheat exporters. Wheat has jumped 16% in July. Ukraine and Russia together account for 25-30% of global wheat exports, and a disruption during the upcoming harvest will push prices higher. Supply concerns were also reinforced after SovEcon cut its forecast for Russia’s 2026-27 crop by 0.7%, citing weaker prospects in the south and a smaller spring wheat area. Meanwhile, corn hit its highest in over two months, reaching $4.775 a bushel before paring gains, supported by the Black Sea conflict and concerns that the recent heat in Europe will reduce production.