London's Miners Fall as U.S., Iran Exchange Fire — Market Talk

0723 GMT - London's miners fall in morning trade as oil prices move higher after the U.S. and Iran exchanged fire in an escalation that could threaten peace talks. All European indexes were down at the open. Higher oil prices could fuel inflation fears and lead to higher interest rates globally. Precious metal miner Hochschild Mining drops 3.2% while peer Fresnillo slides 2% and Endeavour Mining drops 1.4%. Diversified miners Anglo American and Rio Tinto fall around 1.7%.([email protected])0722 GMT - Yields on U.K. 10-year gilts climb to their highest level since June 11 after renewed U.S.-Iran strikes caused oil prices to rise and revived inflation concerns. The U.S. struck sites along Iran's coast and blocked its ability to sell oil legally on Tuesday in response to Tehran's recent attacks on ships near the Strait of Hormuz. Ten-year gilt yields climb 8 basis points to 4.909%, a four week high, Tradeweb data show. ([email protected])0711 GMT - Bitcoin edges lower as renewed worries about an artificial intelligence bubble and the U.S.-Iran conflict weigh on risk sentiment. Chip giant Samsung Electronics' strong earnings failed to meet lofty expectations, dragging sector peers lower and prompting investors to flee AI investments. The U.S. struck sites along Iran's coast and blocked its ability to sell oil legally Tuesday in response to Tehran's recent attacks on ships near the Strait of Hormuz, WSJ reports. "We do not think that the recent developments will break the ceasefire, but they do highlight the fragile nature of the truce," Jefferies economist Mohit Kumar says in a note. Bitcoin drops 1.8% to $62,514, LSEG data show.([email protected])0706 GMT - Eurozone government bond yields rise in opening trade, with the 10-year Bund yield hitting a four-week high of 3.032%, according to LSEG data. Rising eurozone bond yields follow their U.S. peers, with the 10-year Treasury yield also hitting a four-week high of 4.565% in Asian trade. Yields rise as the U.S.-Iran ceasefire came under renewed pressure, causing oil prices to move higher. The renewed military escalation "serves as a reminder of the fragility of the talks as well as underscores how deep the water between the parties still is," analysts at KBC Bank say in a note. ([email protected])0705 GMT - The dollar trades steady ahead of the release of the Federal Reserve's meeting minutes for June at 1800 GMT. Kevin Warsh's first meeting as Fed Chair had prompted markets to price in more interest rate rises due to his commitment to price stability and projections signalling a chance of tightening. However, Warsh explicitly avoided policy guidance so it seems unlikely he would permit such guidance via the minutes, Standard Chartered's Steve Englander says in a note. "Avoiding any discussion of rate hikes may come to be seen by the market as a reluctance to move." The DXY dollar index trades flat at 101.017, having briefly reached a near one-week high of 101.215 overnight on safe-haven flows due to increased U.S.-Iran tensions and tech-stock selling. ([email protected])0609 GMT - Although JGB yields have been rising rapidly, it would be counterproductive to ask the Bank of Japan to curb the rise by increasing bond purchases, as the yield increase reflects market concerns over fiscal discipline, says Rakuten Securities Economic Research Institute economist Nobuyasu Atago. "Amid persistent inflation, raising the policy rate to adjust monetary accommodation is essential for the central bank to maintain credibility in its policy conduct," he says. "On the other hand, containing long-term yields requires the government to maintain a firm commitment to fiscal discipline" rather than relying on the central bank to solve that problem, he adds. The 10-year JGB yield was last up 3.0 bps at 2.870%. ([email protected])0607 GMT - Valuations in 10-year U.S. Treasury yields look unattractive, therefore Wednesday's 10-year auction might need concession for a smooth takedown of the $39 billion offer volume, J.P. Morgan strategists say in a note. "Given unattractive valuations and a less supportive macro backdrop," the auction likely requires more of a concession in order to be digested smoothly. "We maintain a neutral technical bias as the chart lacks a clear setup," they say. The 10-year U.S. Treasury yield rises 2.2 basis points to 4.550%, having come off a four-week high of 4.565% it reached earlier in the day, according to Tradeweb. ([email protected])0555 GMT - The German 10-year Bund yield is likely to rise above 3% in Wednesday's trade, Commerzbank's Hauke Siemssen says in a note. "Bunds remain in sell-off mode with the latest spike in oil prices and attacks in the Middle East," the rates strategist says. Little data is on the calendar to change these dynamics, he says. "Ten-year yields look set to explore territory above 3% today," Siemssen says. The 10-year Bund yield closed at 2.990% on Tuesday, according to Tradeweb. On Wednesday, the German Finance Agency will launch the new 3% August 2036 Bund via auction. ([email protected])0546 GMT - It's only a matter of time before the 10-year JGB yield exceeds 3%, driven by inflation, the BOJ's rate-hiking stance and fiscal fears, says Rakuten Securities Economic Research Institute economist Nobuyasu Atago. Pausing tightening too soon to cap yields could look like prioritizing fiscal needs over price stability, risking further yield spikes and yen weakness, he says. Unless financial stability is threatened, the BOJ is unlikely to take pre-emptive action to curb rising yields and will instead steadily normalize monetary policy, he adds. The 10-year yield was last up 2.5 bps at 2.865%.([email protected])0543 GMT - Danske Bank recommends investors focus on the 10-year maturity at Wednesday's Danish government bond auction. "We recommend focusing on the 10-year segment given the carry versus Germany," says analyst August Hyldgaard in a note. Denmark will tap 2028- and 2035-dated government bonds at its last auction before the holiday season, "so activity is slowing down and interest could be limited at the auction," the analyst says. "However, there are no auctions until August, so we have previously seen solid demand at the auctions." ([email protected])0536 GMT - U.S. Treasury yields rise in Asian trade with the 10-year yield hitting a four-week high of 4.565%, according to Tradeweb data, as oil prices gain amid fresh tensions testing the U.S.-Iran ceasefire. The release of the Federal Reserve's minutes of the last meeting will be awaited later in the day. However, the minutes "may be shrunk, just like the statement and the press conference policy discussion," says Standard Chartered Bank's Steve Englander in a note. "Markets may interpret the lack of guidance as reluctance to signal a willingness to raise rates," the head of global G-10 FX research and North America macro strategy says. ([email protected])0523 GMT - The European Central Bank's release Thursday of the accounts of the June Governing Council meeting will receive investor interest, but the decline in oil prices since the meeting mitigates the urgency of future policy debate, analysts at Daiwa Capital Markets say in a note. At the June meeting, the ECB raised its inflation forecast and the central bank also hiked interest rates for the first time since 2023. "However, the subsequent decline in energy prices has arguably reduced its relevance for future policy debate, with policymakers at [the meeting in] Sintra last week suggesting that they were in no rush to tighten again as soon as July's meeting," the analysts say. ([email protected])