Written Commentary
ADM Reports Second Quarter 2026 Results
August 4, 2026
Geopolitical tensions continue to cast a very long shadow, underpin high energy prices and inflation concerns, as focus turns to ECB policy meeting and US PPI; digesting hawkish BoJ comments, UK RICS House Price Balance.
- Japan: BoJ Masu comments notable for call to restore positive real rates, while highlighting loose financial conditions.
- Eurozone: ECB rate hike fully discounted, likely to stick with meeting-by-meeting ‘guidance’, market reaction likely to depend on depiction of appropriateness of current rates relative to outlook risks.
- USA: PPI set to rebound quite sharply, upside risks from energy and commodity prices, as well as transport and warehousing.
EVENTS PREVIEW
There remain no signs of a de-escalation of tensions in the Persian Gulf, Arabian Peninsula or the Black Sea, with the US President’s speech at the Republicans’ mid-term convention talking of an end to the war with Iran, but personal advisers reportedly advising the President that the war may continue until the end of his term.
Today’s schedule offers two key distractors via way of the ECB policy meeting and US PPI, along with US weekly jobless claims and Existing Home Sales, and the weekly Labour Day delayed report on US oil inventories as well as OPEC’s monthly Oil Market report.
Comments overnight from BoJ’s Masu (generally a centrist in policy terms) further cement the likelihood of a rate hike next week, but as with the ECB today and the Fed next week, markets are really looking for likely very scarce clues on the end trajectory for rates.
Masu’s comments were noticeable for emphasizing that the current stance of policy is loose in terms of financial conditions, as well as the need to return real rates to positive levels, which at the current juncture implies a minimum of 2.0%, i.e. four 25 bps rate hikes.
** Eurozone – ECB policy meeting **
A heavily flagged additional 25 bps ECB rate hike to 2.50% this week is already discounted. As much as the ECB will stick with a ‘meeting by meeting’ stance, the accompanying staff forecast updates and Lagarde’s press conference will clarify the extent of its willingness to tighten further. A slight upward revision to GDP, a tweak higher to inflation forecasts, and casting risks on inflation to the upside would all point in that direction and confirm the ECB as the most (though not overly) hawkish of major central banks.
But it may be the way that the statement and Lagarde’s press conference characterize the current stance of monetary policy relative to the balance of risks on inflation, growth and unemployment which sends the strongest signal on the chances of a further rate hike before year-end.
It is also worth noting on the attached chart on real short-term rates that the ECB still has the furthest distance to travel to return rates to positive territory (albeit marginally), though a weak underlying growth trend also argues against a restrictive stance.
** U.S.A. August PPI **
PPI precedes CPI for a change and may prove to be more consequential and more uncomfortable for FOMC members wanting to see a clear path lower for inflation, with headline forecast at 0.4% m/m to send the y/y rate back up to 5.3%, while core is expected to rise 0.3% m/m to push the y/y rate up 0.5 ppt to 4.7%, and implying some limited upside risks for already high PCE deflators at the end of the month (leaving aside upcoming changes to deflator composition). If forecasts are correct, then this will probably not tip the balance of opinions on the FOMC decisively, and leave Warsh with a management challenge, i.e. how to avoid a deeper split in voting, with three dissents at the last meeting already high.
Last week’s comments by Waller were especially unhelpful, seemingly arguing for a hold in September as long as inflation does not rise (though one has to question how much his views are heavily coloured by political pressure), and at odds with Warsh’s assertion that inflation is too high and has to fall, otherwise the Fed ‘has work to do’. That difference is anything but semantic, and per se both CPI and PPI would need to miss expectations on core measures to fundamentally shift market expectations, which continue to suggest that the September meeting is a ‘coin flip’ (see table).
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