Market Focus: Jobs, Inflation and the Post-Hormuz Economy
Global markets head into the first week of July with investors increasingly shifting their attention from geopolitical risks back to economic fundamentals.
The resumption of tanker traffic through the Strait of Hormuz has helped ease concerns over a prolonged disruption to global energy supplies, contributing to a sharp decline in oil prices and reducing near-term inflation fears. As a result, markets are once again focusing on the strength of economic growth, labor markets, and the outlook for monetary policy.
Against this backdrop, the US employment report, inflation releases across Europe, and a fresh round of global PMI surveys are expected to provide important clues on whether the global economy can maintain momentum into the second half of the year.
US: Labor Market Takes Center Stage
The highlight of the week will be the June US employment report, alongside a broad set of labor market indicators including JOLTS job openings, the ADP employment report, and Challenger job cuts.
Markets expect job growth to moderate while the unemployment rate remains stable, offering another test of whether the labor market is cooling without weakening materially.
Why it matters
Employment remains the second half of the Federal Reserve’s dual mandate. Following easing energy prices and softer inflation concerns, investors are now looking for confirmation that labor market conditions are gradually normalizing without triggering a broader slowdown.
Additional releases, including the ISM Manufacturing PMI, factory orders, consumer confidence, and housing data, will provide further insight into business activity and domestic demand heading into the third quarter.
Europe: Inflation and Central Bank Signals
Attention in Europe will focus on June inflation data from the Eurozone and its largest economies.
Lower energy prices are expected to help moderate headline inflation, while core inflation is forecast to remain relatively sticky, reinforcing the view that underlying price pressures continue to ease only gradually.
Markets will also closely follow the ECB Forum on Central Banking in Sintra, where comments from major central bankers, including Fed Chair Kevin Warsh, ECB President Christine Lagarde, and Bank of England Governor Andrew Bailey, may offer fresh guidance on the global policy outlook.
Labor market data from across the Euro Area and Germany will also help investors assess whether economic activity continues to stabilize despite restrictive financial conditions.
China and Asia: Manufacturing Activity in Focus
China will release both official and private-sector PMI surveys, providing one of the first readings on business activity for June.
Investors will be watching whether manufacturing and services activity can stabilize after recent signs of softer domestic demand and uneven industrial momentum.
Elsewhere in Asia, Japan’s Tankan survey, industrial production, retail sales, and labor market data will provide a comprehensive update on the country’s economic outlook, while PMI releases across the region will offer additional insight into manufacturing conditions and export demand.
What Investors Should Watch
Three themes are likely to drive markets this week:
1. Labor Market Resilience
Will US employment continue to cool gradually without signaling a sharper slowdown in economic activity?
2. Inflation After the Oil Shock
Will falling energy prices begin feeding into lower headline inflation while core price pressures remain sticky?
3. Global Growth Momentum
Can PMIs and business surveys confirm that economic activity remains resilient as markets shift their focus from geopolitical risks back to fundamentals?
After several weeks dominated by Middle East developments and central bank meetings, markets now face a more traditional macro test: whether resilient growth, moderating inflation, and a gradually cooling labor market can continue supporting risk assets through the second half of the year.
Global Stock Markets Recap
Global equity markets traded mixed last week as investors balanced ongoing US-Iran negotiations, expectations of a more hawkish Federal Reserve, and renewed concerns over the technology sector.
Following the release of the US May PCE inflation report, which came in broadly in line with expectations, bond markets partially scaled back expectations of more aggressive Fed tightening. Investors continue to fully price in at least one additional 25-basis-point rate hike this year.
Technology stocks came under notable pressure after Apple announced price increases for its Mac and iPad product lines due to rising chip costs, while reports that OpenAI is considering postponing its IPO until 2027 further weighed on sentiment across the AI and technology sectors.
Against this backdrop, the Dow Jones Industrial Average rose 0.6% over the week, while the S&P 500 declined 1.9% and the Nasdaq Composite fell 4.6%, as weakness in large-cap technology stocks dragged the broader market lower.
European equities also ended the week lower. Weaker-than-expected PMI data reinforced concerns that economic activity across the region is slowing, while the global sell-off in technology shares added further pressure to major European indices.
Asian markets likewise posted losses, with technology and semiconductor stocks leading the decline as investors reassessed growth prospects and the outlook for the global chip industry.
Source: EquityRT Markets Overview. Data as of 26/06/2026.
Commodities
Brent crude fell sharply by 10.7% last week, closing near USD 72 per barrel and returning to pre-conflict levels. The decline followed the US decision to issue a 60-day general license allowing the production, delivery, and sale of Iranian oil, while increased tanker traffic through the Strait of Hormuz further eased concerns over global supply disruptions.
Gold prices declined 1.6% over the week, ending around USD 4,090/oz as easing geopolitical tensions reduced safe-haven demand. A firmer US dollar and expectations that the Federal Reserve will keep interest rates higher for longer also weighed on bullion.
Silver posted the sharpest decline among the major precious metals, falling 8.9% over the week to around USD 59/oz. The selloff reflected both weaker safe-haven demand and concerns over softer industrial demand, particularly as investors reassessed the outlook for global manufacturing activity.
Source: EquityRT Commodity Overview. Data as of 26/06/2026.
Yield Curve Watch: Flattening Continues as Markets Reassess the Outlook
US Treasury yield spreads remained positively sloped through the final week of June, but the yield curve continued to flatten as investors reassessed the outlook for inflation, growth, and Federal Reserve policy following easing energy prices and improving geopolitical conditions.
The 10Y-3M spread narrowed further to around 0.62%, extending its decline from the May peak above 1.0%. While the curve remains comfortably positive, the move suggests that markets are becoming less concerned about persistent upside inflation risks as oil prices retreat and expectations for additional policy tightening continue to fade.
The 30Y-10Y spread edged back up to approximately 0.50% after narrowing earlier in the month. The modest rebound indicates that investors continue to demand a premium for holding longer-dated Treasuries, reflecting ongoing fiscal concerns, elevated Treasury issuance, and uncertainty over the long-run inflation outlook.
Meanwhile, the 10Y-2Y spread remained near 0.27%, its lowest level of the year. The flatter front end of the curve suggests investors increasingly expect inflation to moderate gradually while economic growth slows toward a more sustainable pace, reducing the need for additional policy tightening.
Source: EquityRT ChartPro, Data as of 26/06/2026.
Gold vs USD: Dollar Strength Drives Gold to 2026 Lows
The inverse relationship between gold and the US dollar strengthened further through late June, with a firmer dollar coinciding with one of gold’s weakest periods of 2026.
After reaching record highs earlier in the year amid heightened geopolitical tensions and strong safe-haven demand, gold has steadily retreated as investors shifted their focus toward monetary policy and macroeconomic fundamentals. At the same time, the US dollar strengthened above the 101 level, supported by resilient economic data, elevated Treasury yields, and expectations that the Federal Reserve will keep interest rates restrictive until inflation shows clearer signs of easing.
Earlier in the year, geopolitical risks and concerns over disruptions to global energy supplies drove demand for defensive assets. More recently, the reopening of shipping routes through the Strait of Hormuz, easing oil prices, and improving global risk appetite have reduced the need for safe-haven positioning.
Higher real yields have further weighed on gold by increasing the opportunity cost of holding non-yielding assets, while the stronger dollar has made bullion more expensive for international investors, reinforcing downward pressure on prices.
Unless inflation softens more convincingly or the Federal Reserve signals a faster pace of policy easing, dollar strength and elevated real yields are likely to remain the primary headwinds for gold in the near term.
Source: EquityRT ChartPro. Data as of 26/06/2026.
📈 Chart of the Week: Is Yield Curve Normalization Losing Momentum?
The US yield curve has exited inversion but the normalization story is becoming more nuanced.
Since the beginning of the year, the 10Y-2Y Treasury spread has narrowed from around 70 bps to just 27 bps, its lowest level of 2026.
The move reflects two important shifts:
2-year yields remain relatively elevated as investors scale back expectations for rapid Fed rate cuts.
10-year yields have eased from recent highs as lower oil prices and moderating inflation expectations reduce pressure on long-term rates.
The curve remains positively sloped, suggesting recession fears have faded. Yet the recent flattening indicates that markets are becoming more cautious about the outlook for growth and the pace of future policy easing.
The yield curve has normalized but it has yet to find a new equilibrium.
Data: 26/06/2026
EquityRT ChartPro
Data in the chart may be subject to revision.