The Monday Report – 27 July 2026

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Media reports suggesting a resumption of peace talks between Iran and the US buoyed overseas markets on Friday, sending oil prices lower.

Following Friday's sell-off on the Australian market, ASX200 futures are pointing to a positive start ahead of a busy week featuring key economic data, US corporate earnings and the FOMC meeting.

Good Morning,

The market fell -67 points or -0.8% to 8,772 on Friday. Over the week, the ASX200 finished down -24 points or -0.28%  at 8772, locking in a seventh straight weekly close within ~35 points of the 8800 level. 

The calendar for the week ahead looks relatively full with scheduled quarterly updates  as well as the all-important Australian June/ June quarter CPI print, on top of the pending US FOMC rates decision, plus Big Tech earnings.

For more details, see the FNArena Calendar https://fnarena.com/index.php/financial-news/calendar/

Inflation data on Wednesday, Tony Sycamore, IG

The key data point this week will be Wednesday’s June inflation update.

To recap, last month’s May CPI showed headline inflation easing to 4.0% year-on-year (from 4.2% in April), well below the 4.4% consensus.

However, the RBA’s preferred trimmed mean measure rose to 3.6% from 3.4%, a touch above the 3.5% expectation. Both measures remain well above the RBA’s 2%–3% target band.

Following last week’s stronger-than-expected June labour force report and a sharp 28.5% rise in crude oil prices this month, Wednesday’s release will be in sharp focus.

Consensus expects headline inflation to edge higher to 4.1% year-on-year in June, with the trimmed mean rising to 3.8%. That would put the Q2 CPI at around 3.7% (up from 3.5% in Q1), leaving inflation elevated on all metrics.

An in-line or hotter-than-expected core reading would test the RBA’s hawkish bias and raise the chances of a rate hike in August. A softer print (3.5% or less) would likely keep the Bank on the sidelines until the September meeting.

The Australian interest rate market starts the week pricing in 9bp (a 35% chance) of a hike at the RBA’s 11 August meeting. It is almost fully priced (92%) for a 25bp rise by November that would take the cash rate to 4.60% by year-end.

WTI CRUDE OIL is trading -5.31% lower on IG Weekend Markets, Tony Sycamore

WTI Crude Oil has fallen -5.31% on IG Weekend Markets as signs of a diplomatic off-ramp begin to emerge.

Ahead of the weekend, reports that China was pushing to revive stalled peace talks between Washington and Tehran sparked a bout of profit-taking on Friday.

This was followed by a lack of additional US strikes after the 13th consecutive night on 24 July, which in turn has led Iran to pause its retaliatory attacks.

As we head into the new week, hopes are rising that a genuine de-esclation and return to diplomacy is underway.

A return to the 14-point MOU with a little more clarity around control of the Strait of Hormuz would be a solid starting point.

Today’s Big Picture, J.L. Bernstein extract

Oil Backs Off and the Whole Tape Loosens Up

Brent slid back under US$95 after Reuters reported Pakistan is working, with Chinese backing, to restart U.S.-Iran talks.

China wants this solved because the closed Strait of Hormuz and the Red Sea attacks are hitting its own barrels.

Pakistani officials were blunt that the obstacles are still high.

A Fed Hike Is Suddenly on the Table

Traders now put the odds of a rate increase at next week’s meeting at better than one in three.

A week ago it was closer to one in eight. Oil did that, not the jobs data.

Bill Northey at U.S. Bank still expects a hold, though he points out Chair Kevin Warsh has been plain about getting inflation back to target.

Intel’s Problem Is Supply, Not Demand

Intel $INTC put up US$16.1 billion in revenue against roughly US$14.4 billion expected, with the data center business alone at US$6.3 billion.

CEO Lip-Bu Tan said this is the strongest growth in more than 15 years and that the real constraint is supply, with shortages across wafers, memory and substrates.

He committed to high volume production on the 14A process in 2028. The stock fell anyway, which says more about how chips are trading this week than about Intel.

ANZ Bank, Australian Morning Focus, extract

Equity markets gained, and bond yields declined as oil fell on hopes of diplomatic progress in the Middle East, though moves were partially unwound late in the session.

The S&P500 closed unchanged, though the tech-heavy Nasdaq fell another -0.6% as chipmaker stocks dropped.

In Europe, the EuroStoxx rose 1.1% and the FTSE100 rose 0.9%.

The yield on the US 10yr Treasury note fell -2bp to 4.68%.

In commodities, the active WTI future fell -2.4% to US$89.3/bbl. Gold was stronger at US$4,052.8/oz.

Preliminary global PMIs across US, euro area and UK all improved in July, though given the recent escalation in the Middle East and rise in energy prices, the improvement may be short-lived.

The sample period for the preliminary surveys is typically around the 12-19 July, so the most recent increase in energy prices will not have been fully reflected in survey responses.

Nonetheless, the US composite measure rose to an 8-month high, the UK to a 3-month high, and the euro area to a 5- month high.

Gains were led by services, while manufacturing remained resilient. Both input costs and selling price indices continued to ease from recent highs in the euro area and UK, though in the US, input and output price indices both rose after June’s reprieve.

US composite selling prices rose at the fastest pace in four years.

The Bank of England’s July Decision Maker Panel survey offered no strong arguments for policy action from the BoE ahead of its meeting next week. Three-year ahead inflation expectations eased -0.3ppt to 2.6%, while year-ahead wage expectations eased -0.2pts to 3.3%.

There has been no evidence of higher energy prices or higher short-term inflation expectations feeding into firms’ wage expectations since the conflict began. 

On Friday, Iran reportedly rejected a US ceasefire proposal via Iraq, while other states continue to push for a resumption of US-Iran talks.

Diplomatic channels remain open, even if proving unsuccessful. It is not clear where the exit ramp is, with evidence to date suggesting that Iran has a high tolerance for waiting it out while political pressure builds on oil prices and thus on the US president, and with the US public having little tolerance for a major military escalation.

New skirmishes in the Red Sea between the Houthis and Saudi Arabia up the ante further. The buffer provided by the rundown in crude oil inventories is finite, and oil prices will be significantly more volatile in the months ahead if the Strait of Hormuz remains closed.

Markets may be mildly encouraged by the fact that over the weekend, the US paused strikes (without explanation) while Iran signalled it would also pause retaliatory attacks and, separately, said it was meeting with Oman regarding the Strait of Hormuz

The next inflation storm? Food, Fertiliser and El Nino, Melanie Baker, Royal London Asset Management

From an energy shock to a food price shock?

The rise in energy prices and the closure of the Strait of Hormuz may have stirred the embers of the next inflation spike: one centred on food.

As we move into the second half of the year, agricultural input costs, particularly fuel and fertiliser, have also risen sharply.

This is happening against a backdrop of more frequent extreme weather linked to climate change, now compounded by the prospect of a strong El Nino. Together, these forces could reinforce each other and push food prices higher.

Fertiliser a key transmission channel

Fertiliser is a critical transmission channel. The cost and availability backdrop has deteriorated since the conflict in the Middle East, increasing the risk of weaker harvests over the coming year.

Higher fertiliser costs can make application uneconomic for some farms, reducing crop yields. Urea, the most widely available nitrogen fertiliser, was up more than 65% by mid-May from end-February levels, while EU nitrogen fertiliser prices were 40% above December levels.

In the UK, farmers were reportedly considering planting less next season as costs rise. Multiplied across regions, those decisions could mean smaller harvests and higher food prices, with the burden likely to fall hardest on vulnerable households and lower-income economies.

What is El Nino and will we get one?

El Nino is a powerful climate pattern that typically occurs every two to seven years; the last was in 2023/24. The US National Oceanic and Atmospheric Administration has declared El Nino conditions are underway again, with an 81% chance of a “very strong” event during October-December 2026.

Strong El Nino events make extreme heat, heavy rainfall and colder winters more likely in different parts of the world, with the Americas, Asia and Australasia often most exposed.

This time, the effects are likely to interact with climate change, a structural pressure and with already elevated energy and food input costs.

What do El Nino and extreme weather events mean for prices?

Weather shocks do not feed through to agricultural prices immediately: planting and harvest cycles create lags, and effects vary by crop and region. But there is clear evidence that El Nino can lift food prices.

In a 2023 Economic Bulletin article, the ECB cited analysis suggesting El Nino episodes can raise global non-energy commodity prices by around 5% for six to 16 months, with soybeans, corn and rice among the most affected.

The impact can also spread beyond food. Extreme heat and drought can disrupt transport routes through low river and canal levels, reduce productivity through poor working conditions and illness, and hit electricity production by lowering hydro output.

In other words, the price effects may not stop at the supermarket shelf.

What about economic growth – who will be hit the worst? 

El Nino is not automatically bad for growth everywhere. The effects are complex: heavier rainfall can help some regions and crops. IMF research has found evidence of positive effects in the US, but short-lived negative effects in economies such as Australia and Japan.

But this event will not arrive in isolation. It follows an energy price shock, higher agricultural input costs, reduced fertiliser availability and a climate backdrop already producing more frequent extremes.

Farmers, food producers and retailers may already have seen margins squeezed. Shielding consumers from further price rises may therefore be harder. The growth hit could be more damaging if weaker consumer spending power and supply disruption compound each other.

Higher food prices could also become a broader macro and stability issue, particularly in emerging markets where food inflation has more direct social and fiscal consequences. Reduced policy flexibility is one risk.

A more positive possibility is that higher food prices accelerate investment in climate adaptation, including water infrastructure and irrigation.

What does all this mean for central banks?

We think there is a good chance this year’s energy price shock is followed by a jump in food prices, driven by higher input costs, the climate backdrop and the probability of a strong El Nino.

Like an oil shock, a food price shock creates a dilemma for central banks: it raises inflation while also hurting parts of the real economy, especially consumers.

Given recent inflation history, any food price spike may have a more persistent effect than it would have done a decade ago.

That makes it harder for central banks simply to ‘look through’ the shock. Food inflation could therefore become one more reason for rates to stay above neutral for longer.

Corporate news in Australia:

• Carbar is merging with Carasti and is seeking $10m in funding to support global expansion
• Basalt has joined the bidding process for StraitNZ’s ferry business
• Emeco Holdings ((EHL)) is in talks to acquire struggling mining services company National Group
• KKR is considering reviving a lower takeover offer for Pepper Money ((PPM))
• Monvia ((MON)) debuted on the ASX following a $17.5m initial public offering with shares trading higher on debut
• Larry Emdur’s whisky brand The Ben Buckler has raised fresh funding at a $10m valuation to support expansion into the USA

On the calendar today:

-JP June PPI services

-CH June Ind Profits

-EZ June M3

-US June durable goods

-STANMORE RESOURCES LIMITED ((SMR)) Qtrly update

FNArena’s four-weekly calendar: https://fnarena.com/index.php/financial-news/calendar/

The Australian share market over the past thirty days…

For more detail go to FNArena’s Australian Broker Call Report, which is updated each morning, Mon-Fri.

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