JPM International Market Intelligence | Morning Briefing

20 SECONDS: Broadening Unwind, as Higher Oil & Rates Pressures Equities. EU Political Worries Creeping Up. Secular Themes & SRI in Europe – Electrification Key Focus. China: Macro & Tech.

• Tech & MOMO strength defined tape yesterday, as broadening unwound: combination of rising oil prices as ME tensions escalate (Trump rejected truce extension) and higher rates. Rates are the known risk to watch, particularly at the long-end where positioning is less short.

• Global fiscal spend and AI-related corporate issuance are key drivers behind long-end moves.

Higher JGB yields also having global spillovers: latest US TIC data shows Japanese investors continue to unwind foreign debt exposure.

• More broadly, foreign investors net purchased $6.8bn long-term USTs in June, the least since Feb. Demand was concentrated in Canada and EA vs China the largest net seller of long-term USTs.

• In Europe, political worries starting to creep up – bearish bets on OATs picked up over summer (spread to Bund nearing Oct-25 highs) ahead of French Autumn budget.

• Cyclical and Secular Themes remain at a nice intersection. SRI is very relevant for Europe, and the political agenda is shifting accordingly (table below from Research on policy catalysts).

• Phil’s thematic take on EU Capital Goods flags Europe starts from deeper underinvestment vs the US, so catch up could be meaningful. BNEF highlights a similar dynamic, with more policy support needed to reach Europe’s target of 46% electrification of final energy consumption by 2040.

• Electrification also benefits from renewed AI optimism (JPEUELEC amongst top performing baskets in EU in August). Despite recent strength, Positioning Intel seeing marginal net selling, with 12m L/S ratio only at 5th percentile (still elevated LT, at 84th).

• We are keeping an eye on Battery storage – Spain’s market is ‘on the cusp of a boom’ as installed capacity is expected to triple in 2026.

• China macro releases disappointed across the board. Our economists downgraded 3Q GDP forecast by 0.7%pt to 3.6%q/q saar. Meanwhile, White House confirmed Xi’s US visit for September.

• Chinese LLMs amongst biggest laggards in HK this morning on competition worries: latest Arena AI model blind-testing rankings highlighted Anthropic’s Claude Opus 4 series rising up ranks. Compute also remains a key challenge for Chinese LLMs.

• Heading into key China Tech earnings (incl. BABA) Positioning Intel flags continued net selling in China Internet names, with HSTECH positioning near bottom of its historical range. Question around whether earrings could drive a similar rotation as we saw for US Hyperscalers.