Financial Markets Daily Report
31 July 2026
Risk appetite improved on Thursday amid supportive macro data and lower energy prices, as war tensions around Hormuz did not escalate. Eurozone sovereign yields fell, with steeper curves and tighter peripheral spreads, after GDP growth surprised to the upside across the euro area and its main economies. ECB expectations were little changed ahead of today’s June CPI print, though markets pared odds of a third rate hike.
US Treasury yields also declined. Q2 GDP missed expectations (although its composition was more encouraging) while PCE inflation surprised to the downside, lowering short-term yields and slightly reducing expectations of a second Fed rate hike.
In this context the dollar weakened, particularly against the yen, after Japanese authorities intervened ahead of today's BoJ meeting, which left rates unchanged. Equities gained broadly, led by Spanish banks in Europe and semiconductor and software stocks in the US, on solid earnings.