Cooler US inflation data boosts markets

Summary

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Podcast Summary: Moving Markets – Cooler US Inflation Data Boosts Markets

Host: Lucia Ciachulovic
Date: July 15, 2026

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Episode Overview

This episode centers on the market reaction to recent cooler-than-expected US inflation data. The discussion explores how these numbers have influenced expectations for Federal Reserve policy, the response of US and global equity markets, early earnings reports from major US and European banks, and the Fed’s new chairperson’s statements. The host welcomes Bernadette Anderko (market overview), Dario Messi (fixed income), and Nenat Dinic (earnings analysis) to provide expert insight.

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US Inflation Data and Immediate Market Reaction

• US CPI Surprise:

  • The consumer price index (CPI) for June fell 0.4% month-on-month, pulling annual inflation down to 3.5%, below forecasts (expected: 3.8%).
  • Economists had only expected a 0.2% monthly decline.
  • This release prompted traders to lower their expectations for imminent Fed rate hikes.
  • Quote – Bernadette Anderko [01:03]:
    “The US consumer price index fell 0.4% on the month in June, bringing the annual inflation rate to 3.5%. Economists had expected only a 0.2% monthly decline and for annual inflation to come in at 3.8%.”

• Shift in Fed Rate Expectations:

  • Probability of a rate hike at July’s meeting fell sharply, from 42% (Monday) to 17%.
  • Despite reduced near-term expectations, markets still see a chance for a late-year hike (63% probability after the September meeting).
  • Julius Baer’s economists do not expect any Fed rate hikes in 2026.

• Market Impact:

  • US equities rebounded:
    • S&P 500: +0.4%
    • Nasdaq Composite: +0.9%
    • Dow Jones: +0.02% (dragged by IBM’s 25% decline)
  • Semiconductor stocks rebounded after a previous sell-off.
  • IBM posted its largest single-day drop since 1987 due to soft demand warnings.

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Key Stock & Commodity Moves

• IBM Sinks:

  • Dow component IBM fell 25% (largest drop since 1987) as the company warned of weaker-than-expected Q2 profits, citing “soft demand in its software and infrastructure businesses.”

• Oil Markets:

  • Oil prices initially surged but moderated after President Trump withdrew a controversial fee on ships through the Strait of Hormuz, though geopolitical tensions (US strikes on Iran) kept prices elevated.
  • Brent crude: +1.7%, above $84/barrel.

• Quote – Bernadette Anderko [01:41]:

  • “Shares of IBM weighing heavily on that index with the stock down 25%. That’s the biggest one day drop since 1987…”

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Global Market Roundup

1. Asia

• China:

  • Retail sales beat expectations (+1.0% vs. prior -0.6%).
  • Industrial production up 5.3%; jobless rate fell (5.0% from 5.1%).
  • GDP growth slowed to 4.3% (Q2), down from 5% in Q1.
  • AI firm Deepseek preparing for a possible landmark IPO.
  • MSCI Asia Pacific index rose 2%—tech shares led gains.

• South Korea:

  • Kospi up 7%, reclaiming status as best performing major stock market in 2026.
  • SK Hynix shares jumped 11%.

• Currency & Bonds:

  • US Dollar continued to weaken.
  • US Treasuries rallied, yields fell; sovereign bonds in Japan and Australia gained.

• ASML Guidance:

  • Dutch chip equipment maker ASML raised full-year sales forecast to €43–45bn, citing continued AI chip demand.

2. Europe

• Stocks:

  • Pan-European STOXX 600 index rose 0.2% (recovering from earlier losses).
  • Oil prices and Middle East tensions limited upside.

• Banks & Financials:

  • European banks flat; financial services sector +1.2%.

• Interest Rate Outlook:

  • Market anticipates possible ECB rate hike as early as September.

• Quote – Bernadette Anderko [04:51]:

  • “European shares ended higher yesterday, although Middle east tensions and elevated crude oil prices did somewhat keep a lid on the gains.”

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Central Bank Watch: New US Fed Chairman Kevin Warsh

• Fed Chair’s Testimony:

  • Warsh reinforced his hawkish stance on inflation, stressing its negative impact and the need for “regime change” at the Fed.
  • Announced five new task forces to review Fed operations, promising reforms across “five dimensions” of monetary policy.
  • Continues to highlight AI-driven business investment as a US economic strength.

• Quote – Bernadette Anderko [05:32]:

  • “He called inflation an unfair burden and he reiterated his call for regime change at the US Central Bank. He highlighted these five task forces… to make the inflation surge of the last five years be a thing of the past.”

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Day Ahead: Market Events & Data

• Major Earnings:

  • United Airlines, Morgan Stanley, Johnson & Johnson, BlackRock reporting.

• Central Bank Announcements:

  • Bank of Canada policy decision.
  • Further remarks expected from Fed Chair Warsh.

• Key Data Releases:

  • US PPI inflation (June).
  • Empire State Manufacturing Survey (July).

• Market Outlook:

  • Futures indicate a positive open.

• Quote – Bernadette Anderko [06:13]:

  • “…another busy day of earnings… Bank of Canada announcing its latest policy decision… US PPI inflation for June and the Empire State Manufacturing Survey for July.”

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Fixed Income Market Recap – With Dario Messi

• Inflation Data Effects:

  • The sharp decline in gasoline prices was a driver, but more importantly, service inflation—including housing—also eased.
  • This is significant as service inflation has been especially “sticky” and closely watched by policymakers.

• Policy Takeaway:

  • “One month never makes a trend.” The Fed is likely to maintain a hawkish policy tone, requiring more evidence before changing course, even though Julius Baer expects no further rate hikes.
  • Fixed income strategies remain unchanged: continue “gradually adding duration exposure.”

• Quote – Dario Messi [07:04]:

  • “A key driver I think really was this obvious sharp fall in gasoline prices... but much more important, service inflation... also slowed quite noticeably. That’s particularly important because service inflation has been one of these stickier parts…”

• Quote – Dario Messi [09:48]:

  • “The Fed will remain hawkish in communication while still keeping policy rates unchanged in our view.”

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US & European Earnings Season – Nenat Dinic

US Banks (Q2 2026):

• Strong Beats Across the Board:

  • All major Wall Street banks exceeded EPS and revenue estimates.
  • Key drivers: Record-setting equities trading driven by volatility (geopolitics, AI stock moves, and IPOs).
  • Credit quality is improving; lower charge-offs and delinquencies, with accelerating loan growth.
  • Strong capital ratios enable large-scale shareholder payouts (dividends, buybacks, balance sheet growth).

• Quote – Nenat Dinic [10:27]:

  • “Across all reporting Wall street banks yesterday we saw EPS and revenue did beat consensus estimates by a wide margin... in the investment banking division, particularly within the equities trading business where multiple banks actually posted all time records.”

Europe:

• Early Signs Encouraging:

  • Headline Q2 earnings growth: ~12% YoY (first double-digit growth in three years).
  • Excluding oil & gas, underlying EPS growth is 4.5%.
  • Cyclical sectors recovering: automotive shows first positive growth since 2023; industrials post double-digit EPS growth.
  • Earnings revisions are trending upward.
  • EPS growth gap between Stoxx 600 and S&P 500 expected to narrow or close by Q4.
  • Headwinds remain: Middle East tensions and high oil prices.

• Quote – Nenat Dinic [12:29]:

  • “It is showing positive growth for the first time since 2023, which is quite encouraging... earnings revisions are trending upwards on aggregate.”

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Notable Quotes & Moments

• Bernadette Anderko on the significance of the CPI miss:
  “[US] consumer price index fell 0.4% on the month in June, bringing the annual inflation rate to 3.5%.” [01:03]

• Dario Messi on key inflation drivers:
  “Service inflation, including also housing related components, they also slowed quite noticeably. And that’s particularly important because service inflation has been one of these stickier parts...” [07:04]

• Nenat Dinic on US bank strength:
  “The first theme that we’re seeing is that they have seen a particular strength in the investment banking division, particularly within the equities trading business where multiple banks actually posted all time records.” [10:42]

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Timestamps for Key Segments

• US inflation data & initial market reaction: [00:47–02:45]
• US & Asia market recap: [02:45–04:44]
• Europe market & ECB outlook: [04:44–05:22]
• Fed Chair Kevin Warsh’s remarks: [05:22–06:08]
• Upcoming market events: [06:08–06:41]
• Fixed income outlook: [06:50–10:03]
• US bank earnings recap: [10:11–12:19]
• European earnings season: [12:19–14:41]

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Summary Assessment

This episode provides a concise yet rich overview of global markets’ reaction to US inflation, shifting expectations for central bank policy, and the supportive start to Q2 earnings season in both the US and Europe. Guests offer clear, actionable insights—with a focus on sticking to established investment strategies given the macro environment, while highlighting the resilience and emerging strength in both US and European cyclical sectors.

Listeners walk away with a nuanced understanding of current economic conditions, central bank tension points, and rotational dynamics in global equities.

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Transcript

[A]

Good morning everyone and welcome to Julius Bears Moving Markets Podcast. It is Wednesday 15th July and my name is Lucia Ciachulovic. I am your host today. So yesterday brought plenty of market moving news. We received fresh US Inflation data while the major US Banks officially kicked off the earnings season. I'll be discussing all of that and more with Bernadette Anderko, who will take us through the latest market developments. We will then be joined by Dario Messi for an update on fixed income markets. And finally, Nenat Dinic will be on the show to delve deeper into the earnings season. But first, Bernadette, good morning. Great to have you with us.

[B]

Good morning, Lucia. Thanks for having me.

[A]

So US equities rallied yesterday after a cooler than expected inflation report bolstered hopes that the Federal Reserve may not need to raise interest rates as aggressively as had been feared this year. Can fill us in on some of the details?

[B]

Yes, the US consumer price index fell 0.4% on the month in June, bringing the annual inflation rate to 3.5%. Economists had expected only a 0.2% monthly decline and for annual inflation to come in at 3.8%. And you're right, Lucio, the report definitely prompted traders to scale back expectations for near term Fed tightening. So the probability of a rate hike at the central bank's July meeting fell from 42% on Monday to just 17% y still pricing in an increase later this year, with traders assigning a 63% probability. Rates will be a quarter or half a percentage point higher following the September meeting. But a reminder, our economists do not expect the Fed to hike this year. In the market, semiconductors stocks rebounded after Monday's sell off and The S&P 500 closed higher up just shy of 0.4%. The Nasdaq Composite rose 0.9% and the Dow Jones Industrial Average managed to eke out a gain of 0.02%. Shares of IBM weighing heavily on that index with the stock down 25%. That's the biggest one day drop since 1987 after the company warned second quarter profits will be lower than expected due to soft demand in its software and infrastructure businesses. Oil prices were off their highs yesterday after President Donald Trump abandoned his demand that ships must pay a 20% fee to move through the key Strait of Hormuz Waterway. They did remain higher on the day as the US Launched fresh strikes on Iran. International benchmark Brent crude futures added 1.7% to above $84 a barrel.

[A]

Okay, and the earnings season has gotten off to a solid start boosting equity gains too, right?

[B]

Indeed. Yeah, the big five banks all topped analysts expectations when they reported results yesterday. Goldman Sachs led notable bank stocks higher. That popped 9% after the bank posted an earnings beat. And the big banks JP Morgan Chase and Bank of America also saw gains in the region of 2% after their results.

[A]

Okay, and what's been the story in Asia overnight?

[B]

Well, shares in mainland China were little changed after retail sales unexpectedly grew 1% after a 0.6% drop in May. Industrial production beat forecast to rise 5.3% and the surveyed urban jobless rate eased to 5% from 5.1% in May. Even so, the country's GDP growth slowed, coming in at 4.3% in the April to June period. That's down from 5% in the first quarter. Staying with China a minute, Chinese AI pioneer Deepseek has begun preparations for an initial public offering. It may file as soon as this year, setting the stage for what could be a landmark debut for the country's technology industry. MSCI's Asia Pacific equities gauge climbed 2% overnight, with technology shares among the best performers. South Korea's Kospi jumped 7%, regaining the top spot as the world's best performing major stock market benchmark this year. And SK Hynix shares rose 11% in Asia overnight. Also in the overnight session, a Bloomberg gauge of the dollar extended its losses while U.S. treasuries steadied after Tuesday's rally sent yields sharply lower. This was obviously as traders were unwinding bets that the Fed would begin raising interest rates as soon as this month. And we saw sovereign debt gaining in Japan and Australia overnight. And the tech sector got a further lift later in the session after the Dutch semiconductor equipment maker ASML this morning announced that it expects full year sales to be between 43 and 45 billion euros. That's significantly up from previous guidance, with its customers continuing to ramp up production capacity of AI chips.

[A]

Let's stick with Europe then. What caught your eye in yesterday's session? On this side of the pond, European

[B]

shares ended higher yesterday, although Middle east tensions and elevated crude oil prices did somewhat keep a lid on the gains. The pan European STOXX 600 index closed 0.2% higher, recovering losses from earlier in the session of as much as 0.9. Traders currently see the European Central bank hiking rates as early as September amid lingering inflation concerns. I talked about US Banks earlier, so I should also mention European banks ended 0% higher on the day and financial services climbed 1.2% yesterday Lucia.

[A]

Okay, Bernadette. And of course we need to talk about the new Fed chairman, Kevin Walsh, don't we? He delivered comments to a congressional panel yesterday.

[B]

Yes, and he ramped up his recent tough talk on inflation while also touting the strength of the US Economy and the benefits coming from business investment, particularly involving artificial intelligence. He called inflation an unfair burden and he reiterated his call for regime change at the US Central bank. He highlighted these five task forces that he's created to look at all aspects of how the Fed conducts its business and has said that reforms are going to be put in place across five dimensions in monetary policy order to make the inflation surge of the last five years be a thing of the past.

[A]

Now, before I let you go, Bernadette, what should we be looking out for in the day ahead?

[B]

Well, we've got another busy day of earnings. We've got United Airlines, Morgan Stanley, Johnson and Johnson and blackrock, amongst others, set to report. We'll be hearing from Fed Chair Walsh again. Bank of Canada announcing its latest policy decision. And the Fed is going to be releasing the Beige Book Data releases include US PPI inflation for June and the Empire State Manufacturing Survey for July. And currently futures are pointing to a positive open. So let's hope it stays that way. Lucia.

[A]

Yeah, let's hope so. So thank you very much for this nice overview, Bernadette.

[B]

Thank you for having me.

[A]

Let's now turn to the world of fixed income. Good morning, Dario.

[C]

Good morning, Lucia.

[A]

So we've seen the latest US Inflation data come in softer than expected. What stood out to you?

[C]

Yeah, I mean, as we already just heard, US Inflation declined more than expected in June, which is at the end clearly encouraging for markets. A key driver I think really was this obvious sharp fall in gasoline prices, which helped to bring overall inflation lower. But this was kind of clear, right? So at the same time, and for me, much more important, service inflation, including also housing related components, they also slowed quite noticeable. And that's particularly important because service inflation has been one of these stickier parts of the whole inflation story and also one that typically varies policymakers much more. So overall core inflation moved lower as a result at the end, definitely moving in the right direction at the same time. And this is something that even Warsh said yesterday, one month never makes a trend. So this is kind of just one report, but still it sends a signal and is certainly helpful for a short term monetary policy outlook. That's also quite visible in market, as we heard before in the pricing there a much higher bar. Now for a step Already in July. So basically more time to think about for the Fed.

[A]

All right, and talking of which, how do you see the Fed reacting now?

[C]

Well, again, I mean it's a good report, but Varsh stated it, he would probably keep this hawkish tone for the moment. It was just one reading. Inflation is falling, but still above the Fed's target. And policymakers will want to make sure that progress is durable before declaring any victory here. I think this is just natural, specifically at this point in time. So I would expect the rhetoric to remain focused on price stability. This is what we hear so far also and really making sure that inflation expectations stay well anchored. And that's really also what we heard in the testimony. That said we, as Bernadette mentioned also before in our books, our economists, they don't go for a hike. So we have no hike there. And that's mostly because there seems to be, and that's important, a lag of second round effects through the wage channel, through labor market. And that's very helpful to remain put. So in other words, the Fed will remain hawkish in communication while still keeping policy rates unchanged in our view.

[A]

So no change for bond market positioning, I assume.

[C]

Exactly. No surprise here. No need to change anything from a portfolio perspective. We really continue to see the merits here and gradually adding duration exposure.

[A]

Very interesting. Thanks a lot for being with us this morning, Dario.

[C]

Thanks for having me, Lucia.

[A]

And now over to you, Nenat. Good morning.

[D]

Good morning, Lucia.

[A]

So we've heard from Bernadette that yesterday we've seen a wave of earnings reports from major US banks. Overall, how would you characterize the results of the sector?

[D]

Yes. So generally it's been a remarkably positive quarter for US Banks. Across all reporting Wall street banks yesterday we saw EPS and revenue did beat consensus estimates by a wide margin. And the general development also supports our constructive outlook for the sector. So the first theme that we're seeing is that they have seen a particular strength in the investment banking division, particularly within the equities trading business where multiple banks actually posted all time records. And these higher trading volumes were strongly driven by the elevated market volatility from geopolitics, but also from the major moves in AI stocks and also the IPO listings over the past quarter which basically basically generated a strong client activity. Then for the second theme, we've also seen resilient credit and loan growth acceleration. So consumer and commercial credit quality improved year over year and we have seen that charge offs and delinquencies were declining. So this is a very strong signal, especially in combination with loan growth accelerating this quarter compared to the previous quarter and generally signals an improving economic confidence. And then the last theme that we have observed is the confirmation of the capital strength of this bank. So basically this enables the large shareholder payouts that they have announced recently so the regulatory capital ratios held comfortably above the minimums required. And in general we would believe that the sector wide unlocking of dividend increases, multi billion buyback programs and also the ongoing balance sheet growth will be supported from this confirmation in capital strength.

[A]

Okay, and the earnings season in Europe is also picking up slowly with some early reporters this week. Could you give us a broad overview and some sector highlights?

[D]

Yes. So the headline number four, Q2 earnings growth in Europe looks very promising with around 12% year on year. And this is actually the first double digit EPS growth in three years for Europe. However, a large part is coming from the oil and gas sector. So if we strip the sector away, the underlying growth actually looks more modest with just 4.5%. Nevertheless, we are seeing a continuation of the recovery in cyclical sectors. Automotive for example is a very good example. It is showing positive growth for the first time since 2023, which is quite encouraging. Also, industrials are performing well with double digit EPS growth. And another positive aspect is that earnings revisions are trending upwards on aggregate. So even if we exclude the oil and gas sector, full year EPS growth estimates remain actually above pre war levels. And over the past two months we are seeing analyst upgrades, outpacing, downgrades. And for much of the past two years it's actually been the opposite. And the last important observation for the European earnings season is maybe that the earnings gap between the Stoxx 600 and the S&P 500 is expected to narrow from Q2 onwards and potentially even close by Q4. So overall we don't believe that this upcoming earnings season in Europe will on its own provide a strong catalyst to justify a high conviction bullish view on Europe, particularly with the tension in the Middle east flaring up again. Brent crude is again trading above $80. But we are cautiously optimistic and we see some supporting drivers that may underpin a broadening thesis in where investors maybe continue to rotate away from crowded US positioning into more regional diversified equities. Whether that's Europe or other sectors that have been underperforming the past one and a half years. But this would require a confirmation of the strong guidance in the cyclical sectors in Europe and also a more easing of the stagflationary pressure we have seen in Europe so far.

[A]

Super. Thanks a lot for coming on to our show today.

[D]

Nenat thanks for having me. Lucia.

[A]

So that is all for today then. Thanks again to my guests and thank you all for tuning in. Please join us again tomorrow when we will be back with more news moving the market. Have a great day everyone and bye for now.

[B]

The information and opinions expressed in this podcast constitute marketing material and are not the result of independent financial or investment research. Please refer to www.juliusbear.com legal forward/podcasts for further other important legal information.