The 60-day U.S.-Iran ceasefire expired without further negotiations, prompting Trump to take a tougher stance while the Strait of Hormuz remains partially blockaded. U.S. Vice President Vance said: 1) the U.S. will no longer pursue intensive strikes and does not expect a swift ceasefire; 2) the priority has shifted to stabilizing U.S. oil prices rather than reopening the Strait of Hormuz; and 3) preventing Iran from obtaining nuclear weapons remains a strategic, but not immediate, priority. This suggests economic containment may replace military strikes, pushing global oil prices higher. The U.S. 30Y Treasury yield rose to 5.3%, the highest since 2007, while the 10Y yield reached its highest since Jan 2025. Meanwhile, heavy debt issuance by tech giants to fund AI capex has increased valuation-reset and rebalancing risks for growth stocks. High-valuation tech and semiconductor stocks sold off sharply, driving greater global equity volatility.
A U.S. Treasury selloff drove global government bond yields higher, with Japan’s 30Y yield briefly reaching 4.16% and Germany’s 30Y yield hitting 3.76%, the highest since 2011. Amid the global bond selloff, U.S. Treasury Secretary Bessent announced plans to increase long-term Treasury buybacks from US$2bn to at least US$4bn, targeting 10Y–30Y bonds to stabilize market confidence. Global yields subsequently eased but remained elevated as U.S. debt concerns persisted. Asian IG bonds and EM local-currency bonds gained.
The U.S. federal deficit surged to US$432.3bn in July, the highest monthly level in over five years. Outstanding government debt has reached about US$40tn, with annual interest expense at US$1.2tn. Rising Treasury supply and fiscal deficits have pushed investors to demand higher term premiums. Key drivers of higher long-term yields include: 1) worsening U.S. fiscal conditions, 2) heavy debt issuance by AI tech giants creating a crowding-out effect, and 3) renewed Middle East tensions lifting oil prices.
2Q software earnings were mixed. Beyond booming cloud demand at the four major CSPs, 64% of non-CSP e-commerce, travel and lifestyle services stocks and 56% of enterprise software stocks gained post-earnings, averaging +5% and +4%, respectively, outperforming ad/subscription and fintech/payment names. Stock selection should increasingly shift from AI themes toward companies delivering sustainable growth and measurable AI benefits.
Rapid AI infrastructure expansion is driving strong copper demand as large data centers, cloud platforms and high-performance computing capacity continue to scale. Demand for copper foil, high-speed copper cables, connectors and related materials is rising, alongside sustained copper consumption in electronics and energy storage. Coupled with improving global mfg. PMI, tight refined copper supply-demand conditions are keeping copper prices elevated and supporting strong mining earnings.
Gold has fallen nearly 30% from its YTD high of US$5,599/oz to US$4,000/oz, mainly reflecting a shift in rate-futures pricing from Fed cuts to hikes this year. However, with U.S. inflation easing and employment cooling, expectations for further Fed hikes by year-end have declined. Rate futures now imply at most one 25 bps hike, with a possibility of no hike. Headwinds for gold are therefore fading. Recent liquidity provision by the U.S. Treasury has also pushed U.S. real yields lower and weakened the dollar. As the dollar typically moves inversely with most commodities, gold prices have rebounded.
