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Markets are bracing for volatility as geopolitical tensions, central bank moves, and mixed economic data converge in this crucial final session of July. Investors are on high alert ahead of the Federal Open Market Committee (FOMC) meeting.
In the Middle East, tensions have escalated dramatically following the assassination of Hamas leader Ismail Haniyeh by Israeli forces in Tehran. This act of violence has prompted Iran to declare three days of national mourning and threaten retaliation, potentially exacerbating regional instability. The situation follows the killing of Hezbollah’s senior military commander Fuad Shukr by Israeli forces in Beirut, further inflaming tensions.
On the economic front, the Bank of Japan (BoJ) has raised its interest rate by 0.15 percentage points to 0.25%, its second hike since March. The BoJ also announced a reduction in its bond-buying program, a move intended to signal a gradual shift in monetary policy.
Eurozone inflation unexpectedly increased to 2.6%, up from 2.5% the previous month, contrary to expectations of a decrease. Core inflation, excluding volatile items like energy and food, remained steady at 2.9%, suggesting potential challenges for the European Central Bank in managing inflationary pressures.
In the U.S., private sector job growth slowed significantly, with only 122,000 jobs added in July, the lowest increase since January 2024 and below the anticipated 150,000. Mortgage applications also dropped significantly, marking the largest decrease in demand for new homes in almost two months.
Market reactions included a spike in oil prices, with West Texas Intermediate (WTI) futures rising over 3.5% due to concerns over supply disruptions. The U.S. dollar weakened against major currencies, while the Japanese yen strengthened following the BoJ’s rate hike. U.S. equity futures surged, driven by gains in the semiconductor sector, with notable rises in stocks like NVIDIA and ASML Holding.