A split Fed, a steeper yield curve and Microsoft delivering

Summary

Moving Markets Podcast – Episode Summary

Episode Title: A split Fed, a steeper yield curve and Microsoft delivering
Date: July 30, 2026
Host: Bernadette
Guests: Roman Canciani (Head of Product and Investment Content, Julius Baer), Afonso Borges (Fixed Income Research Analyst, Julius Baer)

Episode Overview

In this timely episode, host Bernadette and her guests break down the financial market turbulence following a split US Federal Reserve decision on interest rates, major moves in corporate earnings (highlighting Microsoft and Meta), divergent performances in European luxury and banking sectors, commodity market volatility (especially oil), and what investors can expect in the days ahead. Special emphasis is placed on understanding market reactions to central bank messaging and actionable insights for investors.

---

Key Discussion Points & Insights

1. Federal Reserve Decision & Market Reaction

[00:02-01:41, 06:29-12:20]

• The Fed left rates unchanged as expected, but the decision was split (9-3 vote) with three members advocating for a hike, revealing internal disagreement and fueling market uncertainty.
• Resulting market reaction was sharp:
  • The Dow fell by over 1,150 points, its worst decline in over a year.
  • Bond yields rose amid persistent inflation fears.
  • The bond market was left puzzled by Fed Chair Kevin Warsh's lack of specific forward guidance.

Quote:
“The decision itself was split nine to three… The internal division highlighted the uncertainty surrounding the future path of monetary policy. As a result, we saw a pretty dramatic reaction. The Dow shed over 1,150 points, its worst day in over a year.”
— Roman Canciani (01:00)

• Afonso Borges (Fixed Income Analyst) provided a deeper dive:
  • Contrasted this meeting’s dovish ambiguity with Chair Warsh’s previously hawkish tone.
  • Noted lack of specificity around inflation targets (“Kevin Warsh…left the door open to an evolution in how the Fed targets inflation.” – 08:05).
  • Warned that lack of forward guidance and possible dovish outvoting could lead to more hawkish dissents if inflation persists.

Quote:
“The outcome left the front end yields lower, it left the curve significantly steeper, and it left the dollar weaker.”
— Afonso Borges (07:34)

2. Yield Curve and Investor Takeaways

[09:53-12:20]

• The curve steepened dramatically, with the spread between 30-year and 2-year yields widening by 15 basis points—a significant one-day move; 30-year yields broke above 5.2%.
• This reflects deep market uncertainty about the Fed’s future moves, particularly with Chair Warsh urging markets to “play the ball, not the referee” (i.e., focus on data, not Fed signals).
• Investor Advice: Julius Baer analysts advise a slight overweight in duration within dollar portfolios, anticipating that front-end yields could continue to fall as the market unwinds excess rate hike expectations.

Quote:
“He wants the market to do the Fed’s job instead of the Fed…The market is not really accepting this new narrative and is a bit skeptical.”
— Afonso Borges (10:49)

3. European Market Update: Luxury & Banking Sectors

[01:41-03:53]

• Equity Recap: European stocks ended lower, with notable divergence within luxury names:

  • Kering (Gucci): Stock soared 17% as a smaller-than-feared sales decline boosted confidence in turnaround efforts.
  • Hermès: Plummeted 11% after warning about slower Chinese growth and further price hikes.
  • Signals that luxury is acutely sensitive to shifting sentiment and macro risks.

• Banks Outperforming:

  • UBS, Deutsche Bank, and Standard Chartered all announced robust earnings and aggressive share buybacks, highlighting capital strength and a focus on returning value to shareholders.
  • Trading and wealth management performed especially well in a volatile market backdrop.

Quote:
“Deutsche Bank also exceeded forecasts, benefiting from a record breaking rise in fixed income trading revenue…Standard Chartered joined the party with a US$1 billion buyback after posting better than expected pre-tax profits.”
— Roman Canciani (03:25)

4. Corporate Earnings: Microsoft vs Meta

[03:53-04:42]

• Microsoft: Exceeded expectations, led by “impressive growth in its cloud computing business, Azure specifically” (04:08). Stock jumped ~8% after-hours.
• Meta: Sales hit records, but profit disappointed due to higher costs and a muted outlook. Stock fell ~7% after-hours, showing that differing AI investment paths are yielding mixed results.

Quote:
“Microsoft absolutely crushed expectations…Meta...sales were record breaking, but profits disappointed partly due to rising costs.”
— Roman Canciani (04:05)

5. Commodities: Oil Market Volatility

[04:42-05:18]

• Oil prices spiked on escalating Middle East tensions (Iranian attacks on US forces/US strikes against Iran), but the market appeared to stabilize (“Brent is trading around US$92 at the very moment, perhaps the market believes the Iranian response will be contained.”)

Quote:
“Geopolitical risks remain firmly in play...a rally in oil prices currently stalling...”
— Roman Canciani (05:03)

6. What’s Next: Upcoming Market Movers

[05:18-06:20]

• Key releases: global GDP, inflation, and employment numbers.
• Focus on Bank of England’s rate decision (no change expected, but commentary key), and Bank of Japan’s meeting tomorrow.
• Crucial US tech earnings (Apple and Amazon) are on deck, likely to drive market action before the weekend.

Quote:
“It’s going to be a big busy end of the working week. Indeed.”
— Roman Canciani (06:00)

---

Notable Quotes & Memorable Moments

• Roman Canciani on Fed split:
  “Three members actually voted for a rate increase, signaling ongoing concern about persistent inflation. This disagreement rattled markets.” (01:03)
• Afonso Borges on market confusion:
  “Kevin Warsh keeps pushing a message that markets should play the ball, not the referee…And the market is not really accepting this new narrative and is a bit skeptical.” (10:49)
• Roman Canciani summarizing banking sector:
  “Banks with healthy balance sheets are clearly prioritizing, rewarding their shareholders.” (03:47)
• Afonso Borges on investor strategy:
  “We continue to recommend investors to have a slight overweight duration stance in dollar portfolios at this point.” (11:59)

---

Important Timestamps

| Timestamp | Topic | |:---------:|----------------------------------------------------------| | 00:47-01:41 | US Fed meeting results & market reaction | | 01:53-03:53 | European markets: luxury divergence & bank earnings | | 03:53-04:42 | Tech earnings: Microsoft vs Meta | | 04:42-05:18 | Commodities: Middle East tensions & oil volatility | | 05:18-06:20 | Key upcoming events: Central bank decisions, earnings | | 06:29-12:20 | In-depth analysis: Fed split, yield curve, investor guidance (Afonso Borges) |

---

Key Takeaways

• Fed’s internal division leaves market uncertain; expect continued volatility.
• Yield curve steepened sharply, reflecting skepticism about Fed’s new messaging style.
• European luxury stocks diverged sharply; banks are capitalizing on volatility with buybacks.
• Microsoft’s cloud growth stands out; Meta facing profit pressures despite strong sales.
• Oil markets react to geopolitics, but further volatility hinges on escalation.
• Watch for central bank signals and US tech earnings to shape the week’s remaining market action.
• Julius Baer recommends a slightly overweight duration position amid ongoing rate uncertainty.

---

Tone & Language:
The episode is analytical and focused, with clear, jargon-light explanations suitable for investors and market-watchers seeking clarity amid swirling news. Each guest brings a calm, measured perspective, emphasizing data, historical context, and actionable advice.

---

For full legal disclosure, listeners are advised to refer to www.juliusbaer.com/legal/podcasts.

---

This summary has omitted advertisements, episode intros/outros, and non-content segments.

Transcript

[A]

Good morning and welcome to the Julius Baer Moving Markets podcast on Thursday 30th July, with me, Bernadette and Dareco. Well, a divided Federal Reserve left rates unchanged yesterday, as our economists expected. But the headlines after Kevin Walsh spoke to the press following the decision pointed to the fact that the bond market was very much left scratching its head. Our fixed Income research analyst, Afonso Borges will join me on the podcast later to help us unpick what markets expect now and how investors should digest the decision. But first, for a roundup of all the latest financial news, I'm joined by the head of product and investment content at Julius Baer, Roman Canciani. Good morning and welcome to the show. Roman.

[B]

Good morning, Bernadette.

[A]

So, Roman, we've seen quite a bit of volatility recently, haven't we? Yesterday was particularly turbulent, especially after the Fed announcement. So perhaps you could walk us through what unfolded.

[B]

Absolutely. Well, the Federal Reserve decided to pause further, keeping rates unchanged. That might seem straightforward, but the decision itself was split nine to three. Three members actually voted for a rate increase, signaling ongoing concern about persistent inflation. This disagreement rattled markets. The expectation was largely priced in, but the internal division highlighted the uncertainty surrounding the future path of monetary policy. As a result, we saw a pretty dramatic reaction. The dow shed over 1,150 points, its worst day in over a year. Bond yields also ticked upwards, reflecting those lingering inflation worries.

[A]

Sounds like the message is still hawkish, but I'll get into more detail with Fonso later. Why don't we talk about Europe's day, Roman? How did European markets fare amidst this global backdrop?

[B]

European equities also ended lower yesterday, with the Stoxx 600 falling slightly. However, the story within Europe was far more nuanced. We saw a really striking divergence in the luxury sector. Kering, the parent company of Gucci enjoyed a massive jump, nearly 17%. Because Gucci's sales decline wasn't as bad as feared. This boosted confidence in their turnaround efforts. On the flip side, hermes plummeted over 11% after flagging slower growth in China and cautioning about future price increases. It really underscores how sensitive these high end brands are to market sentiment at the very moment.

[A]

Indeed. And sticking with Europe, Roman, why don't we switch our focus to the banking sector where we had some positive news, didn't we? Perhaps you could elaborate on that.

[B]

Certainly. Well, European banks have been delivering a remarkably strong set of quarterly results. Earnings have been robust and we're seeing numerous share buyback announcements. This Underlines the sector's capital strength and willingness to return excess capital to shareholders. UBS for instance, announced a new 3 billion US dollar share buyback programme after reporting profits above expectations, driven by strong wealth management inflows and booming trading activity, particularly in equities.

[A]

Okay, that sounds encouraging. Was this then a consistent trend across the board?

[B]

Very much so. Deutsche bank also exceeded forecasts, benefiting from a record breaking rise in fixed income trading revenue. They've announced a further 500 million euro buyback while management maintaining their full year outlook. Standard Chartered joined the party with a US$1 billion buyback after posing better than expected pre tax profits. The common thread running through these results is strong performance in trading and wealth management, capitalizing on heightened market activity. Banks with healthy balance sheets are clearly prioritizing, rewarding their shareholders.

[A]

Okay then. So, turning to the corporate world outside of banking, we had some interesting earnings reports overnight. Microsoft and Meta both releasing number. What's the takeaway there, Roman?

[B]

Well, it was a tale of two tech giants. Microsoft absolutely crushed expectations fueled by impressive growth in its cloud computing business, Azure specifically. Their stocks soared about 8% in after hours trading. Meta, however, presented a more mixed picture. Sales were record breaking, but profits disappointed partly due to rising costs. Their revenue forecast for the coming year was also underwhelming, causing the stock to fall about 7% in after hours trading. It highlighted highlights how different approaches to AI investment are panning out. Microsoft seems to be reaping rewards faster while Meta is still navigating the expense side.

[A]

All right, why don't we broaden the scope to commodities? Roman? Oil prices have been volatile lately and I understand there's been a significant spike now linked to the escalating tensions in the Middle East.

[B]

Exactly. Well, oil prices jumped significantly after reports of Iranian attacks on US forces. Despite a subsequent dip, the geopolitical risks remain firmly in play. Interestingly, even with renewed US strikes against Iran overnight, a rally in oil prices currently stalling Brent is trading around US$92 at the very moment perhaps the market believes the Iranian response will be contained.

[A]

Okay, let's hope so. Looking ahead, Roman, what are the key events our clients should be paying attention to today and indeed tomorrow?

[B]

Well, there's a lot on the calendar today. We have plenty of economic data releases across the globe, crucial figures on gdp, inflation and employment. And all eyes will be on the bank of England's rate decision this afternoon. The expectations are for no change, but the communication afterwards will be scrutinized. Currently, expectations are that a rate rise is more likely than not in September. Then tomorrow it's the bank of Japan's turn for a rate decision. Plus, and this is even more important today, I guess we'll get earnings from Apple and Amazon after close of trading in the US Tonight. They'll undoubtedly move markets. It's going to be a big busy end of the working week. Indeed. And just before I go, a quick look at the futures markets. And it seems that Microsoft's positive results help all major US Stock market futures are currently trading in the green. Let's see what the day has in store for us. That's it from me.

[A]

Thank you so much for bringing us the news roundup today. Raymond.

[B]

Thank you very much for having me, Bernadette.

[A]

Now, to dig a little deeper into that outcome of yesterday's FOMC meeting. I'm delighted to welcome Afonso Borges to the show. Good morning to you, Afonso.

[C]

Good morning, Bernadette. Thanks for having me.

[A]

So well, thank you for staying up late last night to unpick the outcome of the Fed meeting. We know rates were left unchanged, but what did we really learn after yesterday's meeting?

[C]

Yeah, I really like the way you put it at the beginning of the call. Yesterday's decision left markets scratching its head. It's really the mirror image of the first meeting under Kevin Warsh. So as a reminder, back in June, Kevin Warsh delivered quite hawkish guidance after his first meeting as the chair of the fomc. And that pushed front end yields higher, it pushed the dollar stronger and he really flattened the treasury curve. This outcome at the time was seen as reinforcing Fed credibility, the notion that the Fed would be independent from political wishes. What we learned yesterday was very different from that. And the outcome left the front end yields lower, it left the curve significantly steeper, and it left the dollar weaker. We already talked about the decent votes. I think that's part of the picture. The more concerning aspects of yesterday's meeting, at least as the bond market is concerned, have to do with the lack of specific guidance from Chair Warsh on what he understands to be the key metrics on inflation. So historically we know that the Fed targets pce, and in particular they target core prices within that index. And Kevin Warsh yesterday left the door open to an evolution in how the Fed targets inflation. And this is a bit concerning to market because it adds a lot of confusion around the Fed's reaction function precisely at a time when the Fed is already providing less guidance to the market. So as we look to the outcome of this meeting and what it means for markets going forward. We're also reminded that Kevin Warsh is only 1 out of 12 voters in any policy decision and that if he is inclined to push for a more dovish outcome or a more dovish interpretation of the data in the future than what the rest of the committee seems is appropriate, he's likely to be outvoted. So yesterday's decision we already discussed resulted in a 9 to 3 vote with three voters, Amik Kashkari, but also Logan voting in favor of a hike. And if Kevin Warsh tries to push too dovish of a narrative within the group, it is likely that we'll see more hawkish dissent in the future, which might lead him to a position where he is outvoted in a direction of a hike. So if you look at what the market has priced in for the next 12 months or so, we're still pricing in roughly two hikes, which is not too far from where we were prior to yesterday. But we should note that there's certainly less pricing for a hike in the very near term relative to where we were prior to yesterday's meeting.

[A]

Okay then, so you've already mentioned it. The yield curve steepened yesterday. We saw short dated yields falling longer dated yields rising significantly. Why do you think the market reacted the way it did?

[C]

Yeah, so the moves are quite staggering. If you look at the broad curve, that's the difference between 30 year yields and 2 year yields. It's deepened by around 15 basis points. That is the most in a single day in one year. If you look at the move at the long end of the curve. So looking at those 30 year yields, they rose above 5.2%. They're now trading at the highest level since before the gfc. So it's quite an elevated number. And what I think that tells us is that the market is really confused about Kevin Warsh's reaction function. Kevin Warsh keeps pushing a message that market should play the ball, not the referee, meaning that the market should focus on the data, not on the Fed's reaction function. And he is leaning on this idea that the market should adjust without requiring central bank intervention. Effectively. He wants the market to do the Fed's job instead of the Fed. And the market is not really accepting this new narrative and is a bit skeptical. And he wants market wants to see the Fed effectively acting to address inflation. And before the Fed does that, the market is going to continue to steepen the long end and treat Kevin Warsh's hawkish rhetoric as an empty threat.

[A]

Okay then, so what's the takeaway for investors at the moment.

[C]

Afonso, I think for us, to the extent that there's still a bit too much of a hiking premium priced in over next two years. As a reminder, we think that the Fed will stay on hold over the next 12 months. The market has roughly two hikes priced in over that period. We think that yesterday's move at the front end, which pushed two year yields roughly 10 basis points lower, should continue in the months ahead. And further out, we think that that should help bring down yields along the curve as well. So we continue to recommend investors to have a slight overweight duration stance in dollar portfolios at this point.

[A]

Super. Keep calm and carry on then. Afonso, thank you very much for joining us today and bringing us your insights.

[C]

Thank you.

[A]

Well, that's it for today's podcast. Thanks again to Roman and to Afonso and thank you all for listening. I hope you enjoyed the show and please do tune in again tomorrow. As Roman said, it's to be a busy end to the week, so join Helen Frear tomorrow. She'll be back in the hosting seat with more of our experts to guide you through what's moving markets. Meanwhile, good luck today and goodbye for now.

[B]

The information and opinions expressed in this

[A]

podcast constitute marketing material and are not

[B]

the result of independent financial or investment research. Please refer to www.juliusbear.com legal podcasts for

[A]

further other important legal information.