Oil Price Drop to the Rescue
July 27, 2026
(129) As is often the case, President Trump chose a weekend when news cycles are less responsive for another twist in his Iran war strategy. U.S. air strikes were suspended, and Iran in kind did the same in its campaign against U.S. military targets in the region. In knee-jerk fashion, oil prices plunged 6.8% to $83.27 per barrel currently. Taking their cue in turn, equities revived, sovereign debt yields fell, and the dollar eased a bit.
To wit,
- Share prices in Asia rose at least 1.0% in China, Hong Kong, South Korea, Pakistan and India. Japan’s Nikkei only climbed 0.5, but gains of more than 1.0% were made also in Australia and so far Germany, France and Spain. Rises in DOW and Nasdaq futures amount currently to 1.0% and 1.3%, while those in the S&P 500 and Russell 2000 are somewhat less.
- Ten-year sovereign debt yields have fallen nine basis points in Australia, five bps in France and Italy,m four bps in the U.K. and Spain, three bps in Germany and the United States, two bps in Switzerland and a single basis point in Japan.
- Dollar losses so far this Monday are led by 0.4% slides against the Indian rupee and Swiss franc, followed by a 0.3% dip against the Australian dollar and 0.2% vis-a-vis the euro and 0.1% versus the yen and kiwi. The biggest exceptions involve the South Korean won and Indonesian rupiah, each of which is 0.7% firmer against the greenback.
- Gold and silver prices are up 0.6% and 0.8%, while Bitcoin is 0.3% softer.
An interesting week lies ahead. Israeli Prime Minister Netanyahu visits President Trump at the White House tomorrow, and wildfires raging in France and Spain are attracting growing attention. Being the final week of the month, the flow of economic data around the globe picks up considerably and will include both U.S. and European second-quarter GDP figures. But most intriguing will be Wednesday’s FOMC interest rate announcement in which the consensus forecast points to no change but allows also for a possible rate hike. The 22.6% stock market crash on Black Monday, October 19, 1987 is etched into investor lore, but less well remembered is that that bombshell was preceded on September 3rd by an unscheduled FOMC inter-meeting that tightened the U.S. discount rate by half a percentage point to 6.0% and raised the federal funds target from 6 5/8th percent to 7 3/8%. Why is this relevant? Less than a month into the job as Fed Chairman, Alan Greenspan, who happens to be current and newly minted Chairman Warsh’s idol, had pushed for that action both to counter rising inflationary pressures and to lay down a marker that U.S. central bankers were taking their task of preserving price stability very seriously. While the market repercussions of the Fed’s actions that time exceeded the bank’s expectations, it should be noted too that the stock market crash quickly bottomed, and no recession ensued.
The German IFO Institute reported results today of its July business climate survey. The overall index and sub-index of future expectations rose to 5-month highs, while current conditions slid to a 2-month low. All four economic sectors became less pessimistic than in June, led by a 2.9-point improvement in manufacturing to -9.6 and including 5-month highs in services and trade and a 4-month high in construction.
M3 money growth in the euro area quickened in June but averaged slightly less in the second quarter (3.0% year-on-year) than in the first quarter (3.2%). Bank lending to households and to non-financial firms were 3.0% and 4.0% higher in June than a year before.
The July survey U.K. distributive trades conducted by the Conference of British Industries improved to a 6-month high of -54 from a reading of -54 in June and a record low of -68 in April.
Slovenian business confidence reached a 47-month high in July.
Japan’s indices of leading and coincident economic indicators for May were each revised somewhat lower and printed respectively at a 58-month high and a 2-month low. Japanese corporate service prices fell 0.4% on month in June and posted a year-on-year rise of 3.2%, which was a little above the 2025 average increase of 3.0%.
Corporate earnings in China were 18.7% greater in the first half of 2026 than a year earlier.
U.S. durable goods orders orders underwhelmed expectations, rebounding just 0.3% in June from a 4.0% drop in May but still exceeding their year-earlier level by 6.7% during the first half of 2026. Among non-defense capital goods orders (excluding aircraft), there was a 0.9% monthly rise in June and a jump of 9.3% for the whole first half of the year.
In Singapore where interest rate policy is subordinated to exchange rate management, an unexpected further tightening of monetary policy was announced today. This was the second such adjustment in a row by the Monetary Authority of Singapore, which reviews policy only on quarterly basis. As in April, the upward slope of the targeted effective Singapore dollar range was increase while holding the midpoint and width of the S$ corridor unchanged. This time, however, the degree of allowed appreciation was less so than done in April.
In an environment of continued heightened uncertainty, this calibrated adjustment to the policy stance builds on the tightening in April. It sustains an appropriate appreciation path for the S$NEER policy band which will cap inflationary pressures. The extent of this increase is smaller than that in April.
Monetary policy was also reviewed at the State Bank of Pakistan, which had increased its policy interest rate by 100 basis points in April, partly reversing a string of cuts totaling 900 bps in 2024 and 250 bps last year. As officials had done at the prior review in June, the rate was left unchanged at 11.5%. CPI inflation in Pakistan crested at 11.7% in May but at 11.1% last month was still well above a medium-term target of 5-7% that is not expected to be reached until fiscal 2027. “The Committee assessed that the macroeconomic outlook has improved from its previous meeting, though it remains susceptible to heightened risks, particularly following
the resurgence of conflict in the Middle East,” according to officials.
Hong Kong’s trade deficit of HKD 295 billion in the first half of 2026 was 60% larger than a year earlier.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: German business climate index, Japanese corporate service prices, Monetary Authority of Singapore, State Bank of Pakistan
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