Goldman Sachs: Markets shifted back to ‘Goldilocks’ after growth concerns and hawkish policy - FJElite

Risk appetite has rebounded following July’s setback - our is back above 1. Large rotations under the surface linked to AI capex and the Technology sector temporarily weighed on growth pricing across assets (RAI PC1) but it has broadly stabilised, helped by a strong Q2 earnings seasons in the US, Europe and Asia, falling oil prices and also supportive PMIs, at least in DM. After the renewed Middle East tensions there was also a drag on risk appetite from more hawkish monetary policy pricing (RAI PC2) and upward pressure on longer-dated bond yields, with US 30-year yields reaching new post-GFC highs at 5.27% - however, falling oil prices and weaker-than-expected payrolls created some ‘Goldilocks’ relief with Fed pricing shifting more dovish. And while USD/JPY and EUR/JPY interventions have led to a stronger Yen, which has been more consistent with a ‘risk-off’ backdrop, the impact on risk appetite has been limited so far.