• Meanwhile in markets, Micron’s earnings – which showed a 300 percent-plus YoY revenue jump – failed to fuel markets for more than a day. AI related equities are back on a downward march, but it seems the worst of the morning’s sell-off is behind us for now;

• In the US, Nasdaq futures have limited losses to just under one percent after sliding almost two percent earlier in the session. South Korea’s Kospi has trimmed its decline to just under six percent – an improvement from the nine percent drop that triggered circuit breakers earlier this morning;

• The focus on the AI trade is usually on the big winners – particularly the memory chip giants that have delivered triple-digit gains in 2026. But not every stock associated with AI has been so fortunate. The stocks that make up the Magnificent 7 – the major US tech companies – are all firmly in correction or bear market territory. Our Mag 7 index is down 6 percent year-to-date, with punters questioning whether their shift to AI – that has seen massive debt-funded investments – will ultimately pay off;

• The clearest bellwether for AI investment concerns is Oracle, whose CDS spread has risen to its highest level in over a month. Oracle’s CDS spread is currently trading near levels seen during the height of the 2008 recession – though it still sits below the highs reached during the Iran war;

• Moving to FX, the broad dollar is capping off the week with roughly half a percent of gains. USDJPY has now spent over a week straight trading at the 161 handle. Interestingly, yen weakness is not a universal thing – EURJPY is actually marginally lower year-to-date as the euro continues to struggle in 2026;

• The ECB’s broad euro basket is now down 2.5 percent from its January highs. I do want to note that this is only a dent in the euro’s strong rally over the past year and a half. The currency remains up 5 percent since March 2025 – a rally that began in the wake of President Trump’s reciprocal tariff announcements and Germany’s removal of the debt brake;

• On the topic of Germany’s post-debt brake supposed fiscal 'boom’, we want to give ourselves a pat on the back. We have long argued that Berlin would struggle to actually spend the money set aside and it seems we were right: less than 50 percent of the €500bn infrastructure fund that has been allocated is genuinely used on new projects. Instead, old initiatives facing years – or even decades – of delays are simply being folded into the plan (looking at you, Stuttgart Hauptbahnhof);

• The boost to German defense spending boost has been equally underwhelming. Major projects – from new frigates to European fighter programs – have run into bureaucratic realities. Just look at defense giant Rheinmetall, which is now trading below the level it was at when the German fiscal stimulus was announced in March last year. Rheinmetall is now down over 50 percent from its 2025 peak;

• Shifting to broader market commentary, Bund yields are down 2bps across the curve this morning – with the 2-year yield a hair above the 2.50 percent handle. US Treasury yields are down 1-4bps from yesterday’s close in a bull steepening pattern. Brent crude trades at $72.57 at pixel time – having erased the spike triggered by yesterday's reports of a tanker being struck in the Strait of Hormuz;

• Looking ahead, a couple of ECB- and Fed-speakers are lined up to take us into the weekend. Next week, we kick off the second half of the year – with all eyes on the June US labor market report (released on Thursday due to the 4th of July holiday weekend).

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