Please see the below article from Brooks Macdonald received this morning 07/01/2026.
What has happened?
Global equities extended their rally yesterday, with the S&P 500 (+0.62%) and Europe’s STOXX 600 (+0.58%) both closing at record highs. European bonds also strengthened after softer inflation data reinforced expectations that the ECB’s next move could be a rate cut rather than a hike, particularly as final composite PMIs came in weaker than anticipated. In contrast, US Treasuries edged lower, with the 2-year yield up to 3.46% and the 10-year yield at 4.17%. Oil prices reversed Monday’s gains, with Brent crude down -1.72% as concerns over Venezuelan supply disruptions eased. Overnight, prices fell further after President Trump announced that Venezuela would deliver 30–50 million barrels of oil to the US.
Update on Venezuela
Reports suggest Venezuela’s regime is tightening control following Maduro’s removal, leaving questions about US involvement in the country’s governance. Despite political uncertainty, Venezuelan assets continued to recover, with the 2027 bond up +2.22% to 43.5 cents on the dollar. Energy stocks, however, struggled despite broader equity strength. Chevron (-4.46%), SLB (-0.39%), and Halliburton (-3.41%) all declined as oil price fell. Headlines indicated the US is working to avoid supply disruptions, with Venezuela reportedly negotiating oil exports to the US and Chevron booking additional tankers. Trump’s announcement of a 30–50 million barrel transfer likely reflects existing stockpiles rather than a sustained trend, but it helped ease immediate supply concerns.
Softer inflation fuels optimism
Weaker-than-expected European inflation data supported hopes of a more dovish ECB stance. German CPI fell to +2.0% on the EU-harmonised measure (vs. +2.2% expected), while French inflation met expectations at +0.7%. This sets the stage for a potentially softer Euro Area-wide print today. Bond yields across Europe moved lower. Final PMI readings added to the dovish tone, with the Euro Area composite revised down to 51.5. Against this backdrop, equities surged to fresh highs, including the STOXX 600 (+0.58%), FTSE 100 (+1.18%), and DAX (+0.09%).
What does Brooks Macdonald think?
The strong risk-on rally of 2026 showed no signs of slowing, with markets largely shrugging off geopolitical uncertainty. Looking ahead, the key question is whether this optimism can persist amid lingering geopolitical risks and uneven economic data. For now, the combination of easing inflation pressures and central bank flexibility appears to be sustaining risk appetite, but volatility could return quickly if growth indicators deteriorate or geopolitical tensions escalate.
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Charlotte Clarke
07/01/2026