As long as geopolitical risks, inflation concerns, and monetary policy do not provide a clearer direction, market reticence is likely to continue. While the stock market may have become accustomed to geopolitical crises, concern over a protracted conflict in the Middle East is weighing on investor risk appetite much more heavily than a short-term escalation. At the same time, investors are likely to increasingly shift their focus back to inflation trends, which could regain momentum and create additional pressure for central banks to act.
The geopolitical developments in the Middle East and the accelerating US earnings season are likely to remain in focus this new trading week.
Dow Jones Industrial Average Index
Iran conflict: Fighting likely to unnerve investors – US shows openness to diplomacy
Despite recent hostilities between the U.S. and Iran, Washington has shown itself to be open to dialogue. According to Secretary of State Marco Rubio, the U.S. is open to diplomacy, but only on the condition that Tehran seriously adheres to any agreement. Should military tensions continue to escalate, this is likely to contribute to general uncertainty.
ECB to decide on key interest rate level on Thursday – Christine Lagarde in focus
Of interest on Thursday will be how the ECB's European colleagues decide on the future key interest rate level (2:15 PM). From 2:45 PM, President Christine Lagarde is also expected in public.
It will be exciting to see if the central banker allows herself to make statements regarding inflation trends in light of the Iran conflict, thereby also sending monetary policy signals. The so-called deposit rate is currently at 2.25 percent, after the Governing Council decided on an increase of 0.25 percentage points in June.
US monetary policy is likely to remain one of the talking points.
In the USA, the central bank Federal Reserve (Fed) will decide on the future interest rate level next Wednesday (07/29). The current interest rate band is in a range of 3.50 to 3.75 percent. According to the CME Group's „Fed Watch Tool,“ 85.6 percent of market participants expect an interest rate pause, and 14.4 percent expect an interest rate hike of 25 basis points. A month ago, a total of 38.5 percent were still expecting an increase.
Purchasing managers round off trading week – US earnings season could send important impulses
Preliminary Purchasing Managers„ (S&P Global) for the services, manufacturing, and “all" sectors are expected on Friday at 3:45 PM.
Investors should also turn their attention back to the US earnings season. On Tuesday, the results for the past business quarter from companies such as General Motors (ISIN: US37045V1008) will be released, on Wednesday from CME Group (ISIN: US12572Q1058), Alphabet (Class A) (ISIN: US02079K3059), and Tesla (ISIN: US88160R1014), and on Thursday from Intel (ISIN: US4581401001), and on Friday from American Express (ISIN: US0258161092) will be in focus.
