Oil prices held near the $80 mark on Thursday, with WTI crude rising 0.6% to $79.85, as Middle East tensions kept the risk premium alive. European stocks edged lower, with the DAX down 0.8%, while US futures pointed to a slightly positive open. The moves came as markets digested a softer-than-expected US June CPI report, which offered a temporary reprieve from inflation fears, but geopolitical risks and rising long-term bond yields kept investors cautious.
Bond Yields Climb Again
Long-end Treasury yields pushed higher, reversing some of the declines seen after the CPI release. The 10-year yield rose 2.5 basis points to 4.61%, while the 30-year yield climbed back to 5.12%. Short-term yields were more subdued, with the 2-year yield at 4.21%, still below Wednesday's highs. The steepening yield curve reflects ongoing concerns about inflation persistence, exacerbated by the US-Iran conflict and its potential impact on energy prices.
Currency and Commodity Markets
The US dollar recouped some losses from the previous session, with EUR/USD flat at 1.1418 after dipping from an earlier high of 1.1440. USD/JPY inched up 0.1% to 162.35, shrugging off the soft CPI data as the Middle East crisis kept inflation risks alive. Gold fell 0.5% to $4,032, and silver dropped 1% to $58.03, reversing some of the gains from the CPI-driven rally. The Australian dollar led gains among major currencies, while the Swiss franc lagged.
Central Bank Commentary
European Central Bank policymakers offered mixed views on the rate outlook. Bundesbank President Joachim Nagel said interest rates are at an appropriate level after the June cut, while ECB board member Fabio Panetta emphasized the need to keep inflation expectations anchored. ECB policymaker Yannis Stournaras warned that the renewed US-Iran conflict has reignited inflation and growth worries. In Asia, the People's Bank of China reaffirmed its commitment to an appropriately loose monetary policy. Euro area industrial output fell in May, missing estimates, and Spain's headline annual inflation was confirmed at 3.2% in June.
Looking Ahead
Markets now await the US Producer Price Index (PPI) report, which will provide further clues on inflation trends. With oil prices hovering near key resistance at $80 and bond yields climbing, risk sentiment remains fragile. A sustained break above $80 in crude could add to inflation pressures, while any easing in Middle East tensions might trigger a pullback in energy prices.