Headlines:

• WTI crude oil hits $90 for the first time in six weeks
• USD/JPY at 40-year high as Middle East tensions and hawkish Fed bets drive breakout
• Alphabet earnings reaction cools an otherwise selective earnings season
• ECB preview: High bar for the ECB to out-hawk the market; September hike likely if inflation surprises to the upside
• ECB to pause today before delivering next and final rate hike in September – Deutsche
• French business climate brightens a little more as rebound extends into July
• China sends a clear message with live-fire drills in Taiwan Strait

Market update:

• Brent crude up 5.1% to $98.91, WTI crude up 4.7% to $90.95
• European indices fall, DAX down by 0.7%
• S&P 500 futures down 0.6%, Nasdaq futures down 0.8%
• USD leads, NZD lags on the day
• 10-year Treasury yields up 3 bps to 4.685%
• Gold down 1.1% to $4,081

The focus in markets continue to be on the reaction to heightened tensions in the Middle East. With things not getting any better, we’re seeing markets extend the broader theme from this week in trading today.

Oil prices are continuing to ramp higher with WTI crude breaking out to fresh six-week highs above the $90 mark. The gains come as we see added risk aversion in broader markets, with traders and investors seeking shelter in the US dollar. WTI crude is up 4.7% to $90.95 while Brent crude is up 5.1% to $98.91 on the day.

Meanwhile, that is translating to higher bond yields everywhere with 10-year German bond yields briefly touching 3.20% – its highest since 2011 – and 10-year French bond yields hitting 4% again – the highest since 2009. As for Treasury yields, 10-year yields in the US jumped up further by another 3 bps to 4.685%.

And that is translating to a stronger dollar in the major currencies space. EUR/USD is down 0.2% to 1.1385 with USD/JPY sticking at fresh 40-year highs being up 0.3% to 163.58 on the day.

Amid higher yields and a negative risk backdrop, equities are also seen slumping today. In Europe, the DAX is down 0.7% with the CAC 40 down 1.1%.

As for US futures, things are looking dicey after the late selling yesterday as Alphabet’s earnings call is prompting added concerns over AI expenditure. The company reported its first ever negative free cash flow in a quarter and that is pushing shares down nearly 5% in pre-market. In turn, that is dragging down the broader mood with S&P 500 futures down 0.6% and Nasdaq futures down 0.8%.

Looking to precious metals, we’re seeing dip buyers be dealt a setback with gold down 1.1% to $4,081 and silver down 2.3% to $58.33 on the day.

The ECB is up next on the agenda today but the meeting decision is likely to be a non-event more than anything else.

This article was written by Justin Low at investinglive.com.