Expectations

• UK households' inflation expectations declined further in the June Citi-YouGov survey, signaling that price concerns are becoming less entrenched. • Citi economist Callum McLaren-Stewart noted that readings have returned to levels seen before the conflict, suggesting a reduced risk of inflation expectations becoming "deanchored." • This trend is significant as it indicates growing consumer confidence in the Bank of England's ability to successfully control price pressures.

• The U.S. Gross Domestic Product (GDP) grew at a rate that surpassed market expectations, signaling unexpected economic strength. • As a primary indicator of overall health, the GDP measures the total value of all goods and services produced within the country, adjusted for inflation. • This stronger-than-expected growth is significant because it is likely to influence future economic policy decisions and boost positive market sentiment.

• South Korea achieved a historic milestone in 2026 by surpassing ten million foreign arrivals earlier than ever before. • The surge is primarily driven by strong demand from China, Japan, and Taiwan, as well as growing middle-class travel from the Philippines, Thailand, Singapore, and Malaysia. • This growth is attributed to improved air connectivity, the global popularity of Korean entertainment, and a significant increase in visitor spending.

• Tech stocks triggered a broad market decline as investors grew concerned over the massive capital expenditures of AI companies and rising interest rate expectations. • Alphabet reported a 47% drop in Q1 free cash flow, contributing to a trend where combined hyperscaler AI spending has now surpassed $452 billion. • The sell-off highlights a growing tension between the heavy costs of building AI infrastructure and the uncertain timing of when these investments will generate significant profits.

• Experts at the ET Alpha Wealth Summit, including Kailash Kulkarni, asserted that AI should be viewed as a growth enabler for India rather than a threat to the workforce. • India's economic growth is diversifying, with a shift toward manufacturing exports and new trade deals as primary drivers of expansion. • A warning was issued regarding the "financialization of savings," cautioning investors against inflated return expectations in a volatile market.

• Markets are preparing for the upcoming US Consumer Price Index (CPI) report, focusing on inflation expectations and their impact on cross-asset repricing. • Analysis centers on the interplay between economic resilience, which supports earnings and growth, and persistent inflation that threatens to drive up yields. • Key assets under observation include Gold Spot, the US Dollar Index, S&P 500, and WTI Crude Oil futures to gauge investor positioning.

• Japan's Nikkei benchmark index surged 2.75% to reach a historic all-time high of 65,081.96, crossing the 65,000 mark for the first time. • The rally occurred amid thin holiday trading across Asia, with the broader Topix index also rising 0.65% while Australia's S&P/ASX 200 remained largely unchanged. • Market sentiment was influenced by slumping oil prices driven by expectations of a potential deal involving Iran.