European and UK Equity Capital Markets Review July 2026

• Following a strong first half of 2026, equities entered July more cautiously on renewed tension in the Middle East. There was a notable deterioration mid-month as the US and Iran began military strikes again, with Iranian proxies threatening to close the Bab el-Mandeb, and with it access to the Suez Canal, as well as directly threatening the Strait of Hormuz. Equity markets calmed into month-end on reports that a major escalation was unlikely and amid reduced military activity; oil retreated from above $100/bbl intramonth to c.$90/bbl, but remained up materially over July. European equities closed the month higher, with the FTSE 250 up 4.2%, FTSE 100 up 3.5% and STOXX 600 advancing 1.2%. US markets were more mixed, with the S&P Equal Weight gaining 0.9%, the S&P 500 easing 0.1% and the Nasdaq declining 3.2%.
  
  
• Hyperscalers’ significant on-going capex plans relative to longer-term revenue capture has continued to be a focus for much of 2026, and in July, we saw a pivot in the stock market’s attitude to capex for AI. Following the launch of Chat GPT in 2022, the hyperscalers have seen an extended rally, but have drifted so far in 2026 as the excitement moved to chip manufacturers and the suppliers that stand to benefit most. However, in July these sectors and in particular semiconductors experienced a significant pullback also – with Hynix down c.35% and Micron down c.29%. In addition, Alphabet’s 2Q results saw revenue and earnings ahead of expectations, but its share price fell in the aftermarket on news that it would be stepping up capex spend. The debate on whether hyperscalers will generate the required returns from their AI investment continues to evolve.
  
  
• Furthermore, Alphabet and Tesla’s move into negative FCF territory catalysed a sell-off in IG bonds across the sector, with hyperscalers CDs following suit and hitting record wides. As the market grows more cautious of funding the significant AI related capex, investors concerns have also been compounded by Chinese model advancement at lower cost, such as the Kimi K3. Much of July has seen a pivot back towards more traditional sectors such as financials, mining, consumer staples and industrials as a hedge against tech. The FTSE 100 is amongst the best performing indices over the month of July, hitting new highs on 29th July as a result.
  
  
• Central Banks were back in focus in July. The FOMC held rates as expected, and despite three votes for a hike, the communication style of the new Fed Chair caused a level of unease. 30-year Treasury yields reached their highest since 2007, reflecting increased pressure for a rate hike. The BoE followed suit, keeping rates on hold, albeit with more dissenters than anticipated. The MPC vote passed in favour 6-3, Catherine Mann joined Megan Greene and Chief Economist Huw Pill in dissenting and voting for a 25bps hike. In his press conference Governor Andrew Bailey played down the hawkish shift in the vote, denying strongly that the MPC was ‘edging towards a rate hike’. The ECB also kept rates unchanged as expected.
  
  
• Following the landmark SpaceX IPO in June, the largest in history by a significant factor raising $85.7bn to yield an initial valuation of $1.77tn, China followed suit in July with the IPO of memory chipmaker CXMT, becoming China’s largest onshore-listed company as investors showed significant enthusiasm to gain exposure. The listing raised $8.6bn at IPO and surged 466% on its first day of trading to become mainland China’s most valuable listed company, valued at c.$487bn. However, Space X is currently down from its IPO price of $135 and a post IPO high of $225, closing the month at $108, with the first lock ups expiring on 5 August.
  
  
• In Europe, ECM volumes have continued to hold up relatively well, with European ECM issuance of $106.7bn for 2026 YTD, marginally above the 10-year average, and significantly ahead of the comparative period in 2025. Following a quieter April, ECM activity rebounded through May and June, delivering a strong first half before moderating in July amid heightened volatility and the summer holiday period. In the UK, ECM activity has been subdued over July although Investec was active raising £189m in primary proceeds for Hammerson, c.10% of the company’s ISC. Proceeds from the raise will go towards funding the £319m acquisition of a remaining 50% stake in the Manchester Arndale shopping centre.
  
  
• Notable deals in July include the French state investment bank Bpifrance’s sell-down of a 2.5% of its stake in telecom group Orange for €1.1bn, Greek infrastructure and energy company GEK Terna’s upsized €659m fundraise to support future growth and Greek construction company AKTOR's €650m fundraise to finance its €3bn growth investment programme. Notable IPOs include Spanish telecommunications operator DIGI Spain Telecom (€287m) and Swiss healthcare real estate company Infracore (CHF227m). Looking ahead, August is expected to be seasonally quiet, with attention turning to the post-summer issuance window.
   

• Equity markets began 2026 strongly, with European indices continuing the 2025 trend to outperform the US. The outbreak of conflict in the Middle East drove a global markets sell-off over March and early April, given the impact of turmoil in energy markets, but negotiations and a ceasefire between the US and Iran allowed for significant market recovery over May and June.
• Over the May-June period, US equities recovered more strongly than their European counterparts, reversing their earlier underperformance. A robust Q126 earnings season for corporate America, a higher level of energy independence inherent within the US economy (particularly relative to Europe or Asia) and a strong rebound in AI, technology and semi-conductor stocks drove this performance.
• The ‘AI trade’ pivoted over June, away from hyperscalers to those benefitting from their massive spending, in particular chip manufacturers. The AI trade further pivoted in July, with weakness extending to those supplying the sector, as investors grew more cautious on the extent of capex spend.
• The AI trade pivot has seen the UK and Europe recover over July given their lower tech exposure and are now broadly in line YTD with the US. In the UK for July the more domestically focused FTSE 250 outperformed its more internationally exposed FTSE 100 counterpart finishing the month up 4.2%. For July the FTSE AIM 100 closed down 1.4% and FTSE Small Cap up 1.5%. Elsewhere in July, the Stoxx 600 was up 1.2%, S&P 500 marginally down 0.1%, Nasdaq down 3.2% and Russell 2000 down 3.1%.
   

• UK equity market valuations continue to lag the US. However, adjusting for growth it is arguably fewer high-growth opportunities rather than an inability to value growth that drives the differential.
• Whilst all global indices were impacted by the Middle East conflict, the valuation differential between the US and UK has marginally reduced over July. Although the US Q2 earnings season has been strong, multiples have not expanded. In addition, caution over hyperscalers capex spend and a pivoting AI trade has played its part in reducing the differential.
• Despite the slightly reduced differential, UK indices remain close to or below longer-term averages and look attractive relative to other markets.
   

• UK June CPI inflation continued the current downward trend for now, falling to 2.6% from 2.8% and below consensus for 2.7%. Core inflation held steady at 2.6%, despite expectations for a fall to 2.5%, driven by food and fuel prices.
• In the Eurozone inflation for July rose to 2.9% in line with consensus forecasts and above 2.8% in June, whilst core rose to 2.5% from 2.4%. In the US, CPI inflation for June fell to 3.5% from 4.2%, with core inflation fell to 2.6% from 2.9%. New Fed Chair Warsh tried to cement his inflation-busting credibility, with the new Chair stating to lawmakers that the FOMC has 'no tolerance for persistently elevated inflation'. Mr Warsh doesn't seem too concerned about the maximum employment side of the mandate though, characterising the labour market as 'broadly stable'.
• The impact of higher energy prices on the global economy is arguably still to be fully felt, but with spot oil prices now well down from this year’s peaks, it seems likely that the worst outcomes markets feared this spring will be avoided. However, escalations in July have introduced further uncertainty.
   

• Whilst geopolitics remains the dominant concern for European investors, the July BAML survey showed a net 37% expect a Goldilocks environment of robust growth and fading inflation over the next 3 months, making it a dominant regime view for the first time since October 2024.
• Whilst inflation risks remain in focus for investors, it is clear from the latest BAML survey that declining energy prices and easing inflation also provide the largest upside risk for global growth. US policy support and a strong US consumer are also viewed as supportive for the global growth outlook.
• The July BAML survey showed global investors turn marginally more positive on Europe, with Germany remaining most favoured due to its fiscal policy and defence spending, whilst France has fallen on political uncertainty. UK sentiment has improved from lows to neutral following the appointment of new PM Andy Burnham, and the announcement of some new policies, removing some political uncertainty.
   

IPO issuance in Europe

• US$1,710m raised from 24 IPOs in July 2026 across Europe, with an average deal size of US$71m. There were 12 IPOs greater than US$50m, and 6 IPOs greater than US$100m including Spanish telecommunications operator Digi Spain Telecom ($328m), Italian luxury jewellery retailer Gens Aurea ($115m), German healthcare IT provider SMAG Mobile Antenna ($129m) and Swiss healthcare company Infracore ($281m).
• In 2025, there were 49 IPOs greater than US$50m, raising $17.8bn in total, with an average issue size of $363m (vs 47 IPOs in 2024, generating $17.9bn, with an average of $381m).
• Renewed geopolitical tensions in July weighed on the aftermarket performance of recent IPOs.
• Elevated volatility in 2026 has seen shorter execution windows to allow issuers to mitigate market risk and also led some European IPO processes to be delayed.
• There is still a gap to close in terms of European IPO activity to reach 10-year averages, but the medium-term pipeline is healthier than it has been in prior years with a number of flagship assets preparing and monitoring market conditions / execution windows.