Inflation under the spotlight

Financial markets remain resilient despite a sharp escalation in the Middle East. Equity markets are treating this as an energy shock, which will have limited deterioration for global growth potential going forward.

Soft inflation prints last week came from a period before the recent spike in energy, leaving policy makers reluctant to declare the fight over inflation is over. Again, chipmakers came under pressure as some question whether the buildout of artificial intelligence have run too far to justify their elevated valuations.

Last week's highlights

	US CPI fell -0.4% MoM in June, taking headline inflation to +3.5% YoY. Expectations were for +3.8% YoY.   PPI moderated in June on the back of falling energy prices. Softer data allows for Core PCE (Feds measure) to be softer.
	Eurozone CPI came at +2.8% yoy as expected, with core at +2.4%.
	UK GDP for May was mixed, with modestly better GDP and manufacturing while industrial production fell slightly.
	China GDP slowed to its weakest in 3 years at 4.3% yoy. South Korea raised interest rates for the first time in over three years and regulator unveiled measures on single-stock leveraged exchange-traded funds, seeking to stabilize the local market.

Looking ahead to this week, markets will focus on a heavy earnings week in the US, as the week will be light on macro data points. 18% of S&P market cap will report earnings this week, with focus on Hyperscaler capex numbers (GOOG/GOOL, TSLA on Wednesday) as well as broader industrials/defense names (LMT, RTX, HON, UNP on Thursday). Little in terms of US macro data, while FOMC enters blackout Saturday ahead of the 29th July rate decision. We will be watching ECB decision expecting no move, as well as Burnham’s installation as UK PM on Monday.

What's on the radar

	18% of S&P market cap reporting S&P Global PMIs (24/07) FOMC backout begins (25/07)
	ECB Rate Decision (23/07) Eurozone PMIs (24/07)
	New Prime Minister to be instated (20/07) CPI (22/07)
	Trump plans tariffs on Brazil from 22nd July

Chart of the moment - Hitting the brakes?

Source: Bloomberg as of 20/07/2026.

The chart shows the MSCI World Index in Euro terms, and the MSCI World Momentum index in Euro terms. 

• Momentum stocks are now down 33% from the highs, and up only 12.5% YTD. This is after reaching heights of over 60% less than a month ago. 
• Bulls will hope to see the congestion clear: pointing to the magnitude of the move relative to history on both absolute and volatility adjusted basis; positioning will be cleaner now, after margin calls; and an absence of a clear fundamental catalyst.
• Risks remain however, as the AI capex outlook will clearly weigh on the complex. As the earnings season kicks off, any capex disappointments or if the AI narrative deteriorates more structurally, will leave the door open for some further downside.