Summer of Tensions: Global Markets Eye Retail Earnings and Food Inflation

Global markets are in full summer mode as tensions flare in the Gulf, creating numerous risk events for investors. A key focus will be on retail earnings and the US consumer's resilience to higher energy prices and geopolitical uncertainty.

The wave of US corporate retail reports from Walmart (WMT), Home Depot (HD), Target (TGT), Lowe's (LOW), and Deere (DE) will provide a timely check on household budgets. These companies may offer insights into how consumers are shifting spending towards essentials as fuel costs remain high.

JP Morgan has estimated that a strong El Niño could raise global food inflation by about 0.7%. This is a concern, especially for economies like India, where households spend a larger share of their income on food. The United Nations Food and Agriculture Organization has warned of another wave of food inflation.

The price of gold has risen nearly 10% since its six-month low in late June, with investors buying into the metal as inflation expectations and bond yields surge. Central banks have also increased their gold purchases, with a record 289 metric tons bought between April and June.