AI and chip stocks bounced back hard today, recovering some losses of the past two weeks.

The catalyst was news that SpaceX will be fast-tracked into the Nasdaq 100.

It’s a short trading week, with markets closed Friday for the Independence Day holiday. With that, the jobs report has been pulled forward to Thursday.

But the biggest event of the week may not be chips, SpaceX, or jobs. It may come from a stage in Portugal at the annual ECB Forum. Kevin Warsh (new Fed Chair) will appear Wednesday alongside his central banking counterparts from Europe, the UK, and Canada.

Remember, the last time we heard from Warsh, he had just chaired his first FOMC meeting and put the Fed’s entire policy framework under review. Everything is on the table, except the 2% inflation target (for now).

As we’ve discussed for the better part of the past year, since Trump first began turning up the heat on Jerome Powell (threatening to fire him), a new Trump-aligned Fed Chair was always likely to mean more than just a different approach to interest rates. It will likely mean the end of the Fed’s role as central banker to the world, the implicit global backstop that has stood behind the international financial system, particularly through dollar swap lines, for the better part of the last two decades.

And no region is more exposed to that regime change than Europe.

And with that, this week that exposure gets put on a stage in front of the world, at the ECB Forum.

A year ago, we talked about the outcome of the 2025 forum.

Markets were focused, at that time, on what Jerome Powell might signal about rate cuts.

But a more important topic emerged at that forum.

It was the solvency of Europe.

As Europe was faced (and still is) with large-scale fiscal expansion to fund defense, innovation (AI) and energy — the ECB Forum became a public airing of Europe’s inability to fund itself.

As we discussed last July, Europe’s large-scale fiscal spending plan can only work if the ECB monetizes the debt — backstopping the sovereign bond markets, particularly in fiscally weaker member states. But the ECB backstop only works when major global central banks are coordinating (namely the Fed). And under Warsh, the era of coordinated global monetary policy may be over.

With that, ECB President Christine Lagarde opened this year’s ECB Forum today, with a speech defending Europe’s resilience and the strength of its own policy toolkit. It was a speech clearly designed to project confidence to markets. But that confidence in its “tools” rests on the assumption that the ECB can maintain stability in the sovereign bond markets, as they have for the better part of the past fifteen years. 

And on Wednesday, Lagarde will share a stage with the man that may reshape the very backstop that her institution has relied on for fifteen years.