Financial Markets Daily Report
28 julio 2026
Risk appetite surged on Monday as US strikes on Iran remained paused for a second consecutive night. Energy prices declined sharply, with Brent dropping below $90 per barrel. This lowered inflation expectations, with euro area 1Y inflation swaps falling by around 0.2 p.p. to 2.4%. Sovereign yields also declined across the board, particularly in the euro area.
However, interest rate expectations remained elevated: markets continued to price two additional ECB hikes, the first one in September, with Governing Council member Kazimir calling for at least one more hike despite Middle East developments. Fed rate expectations were little changed, with markets pricing a nearly 40% probability of a hike tomorrow.
Equities advanced in Europe after a positive session in Asia. US indices were mixed, with the S&P 500 flat while the Nasdaq posted modest losses, as investors rotated from semiconductors and other AI-related stocks into cyclical sectors. In FX, the dollar recorded modest gains in nominal terms and was mostly flat against the euro.