JPM International Market Intelligence Morning Briefing Aug 5

20 SECONDS: Cyclical + Secular convergence. July Recap. More thoughts on JPY. AI and Labor Market Share. EU Cap Goods.

• Another strong set of markets overnight with Broadening + AI/Tech Strength. Secular and Cyclical considerations reinforce each other.

• The AI/MOMO factor correction is over while fundamental upcycle strongly intact. JPM Analysts do not see any fundamental indicators that signal meaningful weakness: a) “AI Scaling Laws” intact; b) token demand is strong; c) profitability improved across the ecosystem with hardware vendors, AI cloud providers and AI Labs all seeing improving unit economics; d) Capex upgrades. Tech stocks are already anticipating an imminent EPS downgrade cycle or hyperscaler capex cuts in the next 3 months. Hence, we are likely to see further reversal of the July correction.

• Meanwhile, the energy shock fading helps cyclical considerations (e.g. our Econ team notes employment gains should pickup in 2H26 and 2027) and adds to a supportive macro picture — Global Mfg PMI still expansionary (52.7 in July) + US nowcaster for US 3Q GDP spiked to 6.2%; Q2 earnings tracking strong; and Schlegel’s TPM told us to buy at the start of last week. • An interim 60d deal to reopen SoH is possibly announced today. It seems likely that Iran will secure some degree of control over SoH with establishment of fee payment mechanism (options seems to include a voluntary fees). Military realities are shaping the outcome.

• Japan ways of supporting JPY i.e. a) a massive rise in Japanese interest rates or b) Sales of dollars i.e., of USTs aren’t good news for the US. The US clearly sees some risk for UST-yields here, which explains why it is standing behind Japan and trying to deter yen sellers. With ESF resources limited, JPM FX Strategists note the Fed’s FIMA repo facility could provide Japan temporary USD liquidity — up to $60bn currently— reducing the need to liquidate US assets. Raising the counterparty limit could indicate the Fed is willing to play a larger role in cushioning FX/fiscal

stress. There are spillovers to monitor from the JPY move and reversal of yen depreciation can be positive for Japanese stocks but not obvious that JPY strength will last.

• Word is that the best July Recap on the Street is now out