Launch Pad

Hopes for a diplomatic breakthrough between the U.S. and Iran have grown, after Trump said negotiations are progressing well on top of reports suggesting the U.S., Iran, and Oman are close to a 60-day agreement to reopen the Strait of Hormuz. Optimism surrounding the talks have pushed oil prices lower and supported global equity markets, although Iranian officials have noted that any agreement will depend on an end to U.S. threats, while renewed Houthi attacks continue to add an extra layer of risks. Despite improving prospects for a temporary agreement, Trump warned that military action remains an option if talks fail, while the White House and Pentagon dismissed reports of depleted U.S. missile stockpiles, saying that the military has capacity to sustain operations if necessary.

Tech turnaround. Technology stocks have staged an impressive rebound, adding roughly $3.5 tln in Nasdaq 100 market value over four days as stronger-than-expected Q2 earnings restored investor confidence in the AI investment cycle. Gains across semiconductors, software companies, and hyperscale cloud providers were driven by signs that heavy AI spending is generating revenue growth, with companies like Microsoft, Palantir, and Nvidia leading the recovery. So far, tech companies have exceeded earnings expectations this earnings season, with analysts continuing to raise profit forecasts, prompting investors to re-enter the market after July’s selloff. Although the rally has renewed optimism for the AI sector, performance has become more selective, with investors rewarding companies demonstrating clear AI-driven earnings growth while punishing those where the payoff remains less certain.

Eurozone manufacturing activity strengthened in July, with factory output expanding at its fastest pace in nearly four-and-a-half years as overall manufacturing growth picked up. The recovery remains fragile, however, as production was driven mostly by firms working through existing order backlogs rather than stronger new demand, while export orders continued to weaken and manufacturers extended job cuts amid concerns that activity could slow later this year. Although input cost pressures eased and factory gate price inflation moderated, supply chain disruptions linked to the Middle East conflict and higher energy prices continue to pose inflation risks. The stronger-than-expected economic growth and resilient manufacturing sector support the eurozone outlook, but weak new orders and uncertainty suggest the ECB is likely to remain cautious as it weighs the need for further policy tightening.

Alongside the improving economic backdrop, a stronger-than-expected earnings season has continued to support European equities. European stocks climbed to record highs, with the Euro Stoxx 50 gaining 1% in yesterday’s session as investors welcomed solid corporate earnings and signs of easing geopolitical tensions. Bayer rose after reporting better-than-expected profits, while mining stocks advanced on higher copper prices. Energy shares, however, lagged as brent crude fell below $80/bbl on hopes of a Middle East truce. The results reinforce that the current earnings season has been stronger than expected on both sides of the Atlantic. In Europe, MSCI Europe second quarter earnings are tracking nearly 16% year over year growth, the strongest since late 2022, with more than half of companies exceeding analysts’ expectations, the highest earnings beat rate since 2023.

Right to strike or public interest? Canada’s planned labour code reforms are highlighting a fundamental trade-off between economic stability and workers’ bargaining power. Employers want Ottawa to give the labour minister authority to send disputes at airlines, railways and ports to binding arbitration before strikes begin if they threaten the national interest, saying recent disruptions have hurt supply chains, investment and Canada’s competitiveness. Unions counter that such powers would erode the constitutional right to strike and weaken collective bargaining, saying employers are using economic uncertainty to limit worker protections. The government is consulting both sides, with a special mediator emerging as one potential compromise. Which side carries more weight: protecting the economy from disruptive strikes, or preserving workers’ leverage at the bargaining table?

Spider-Man: Brand New Day delivered a record-breaking box office debut, earning $360 million in the U.S. and Canada to surpass the previous domestic opening weekend record set by Avengers: Endgame in 2019, while generating $932 million globally, the second-highest worldwide opening in movie history. The critics also seem to be pleased, earning strong reviews with 90% critic and 98% audience scores on Rotten Tomatoes. The success helped drive one of the biggest domestic movie weekends on record alongside The Odyssey, reinforcing the appeal of the Spider-Man franchise despite broader superhero fatigue. Despite the success of recent blockbusters, overall ticket sales remain below pre-pandemic 2019 levels.

Gold is higher for a third day on easing concerns about the outlook for inflation has reduced the odds of the Federal Reserve raising interest rates. Bullion advanced by more than 2% to almost $4,165, after posting small gains in the first two sessions of the week, while silver also climbed. Markets are now fully pricing in a single U.S. rate increase by year-end, down from two as recently as last week. Last week, Fed officials opted to keep policy unchanged for the fifth straight time, although three dissenters favoured a hike. In recent weeks, some support for bullion has emerged from Chinese institutional investors, who have helped to slow the war-led decline and keep prices above the key $4,000-an-ounce threshold. Gold-backed ETFs in China saw 14 straight days of inflows up to Monday, the longest streak since March, indicating there may be a shift in sentiment in the world’s biggest bullion market after a long run of outflows and price declines.