AFS Markets Blog: Morning 06/07/2026

• Meanwhile in markets, momentum in the equity AI trade has stalled this morning, though it’s far from a collapse. Bond markets are seeing little movement, with US Treasury yields down around 1bp across the curve;

• The KOSPI is down just over half a percent as the AI theme takes a breather, keeping the index just within correction territory. S&P 500 futures are up a quarter of a percent while Stoxx 50 futures are down marginally this morning;

• The strongest-performing European subsector over the past week was aerospace and defense – with the sector surging 9 percent to its highest level since March. The move comes ahead of Tuesday and Wednesday’s closely watched NATO summit in Ankara and amid announcements of fresh defense spending boosts in nations like the UK;

• There may also be a more sinister explanation. Reports emerged that the US warned Poland of potential Russian plans to stage an armed provocation on Polish soil. The exact form such an incident could take – whether a drone strike or an ‘accidental’ border incursion by troops – remains unclear. The reports suggest that Russia wants to test NATO's resolve and make the alliance think twice about sending more of its weapons to Ukraine, as they may need them at home soon;

• Raiffeisen Bank International – our proxy for the Russia-Ukraine peace process due to its heavy exposure to Russian assets – underperformed the Stoxx Bank Index by 2 percent over the past week, but the stock could find some support over the coming days. On the Fourth of July, President Trump and President Putin held a 90-minute phone call – discussing topics related to the Ukraine peace process. On the same day President Trump also called President Zelensky ahead of their expected meeting this week in Ankara. We will be watching RBI closely to see if punters take these talks as a signal of renewed momentum behind an Eastern European peace push now that the war in Iran has settled down;

• In broader market commentary, the broad dollar is marginally higher this morning. The cross we all have our eyes on – USDJPY – is back above the 162.00 handle after gaining more than 70 pips over the course of the session. In commodities, Brent crude is trading around $72 per barrel;

• In our neck of the woods, it is worth noting that ECB-dated ESTR forwards now imply a September hold is more likely than another rate hike – though only marginally with roughly 12bps of tightening priced in;

• Looking ahead, today brings the week's biggest data release in the form of the US ISM Services PMI for June. Beyond the data, there are plenty of ECB- and Fed-speakers on the schedule this afternoon.

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