Mid-East tensions in focus with Oil erasing all overnight gains

EU Mid-Market Update: Mid-East tensions in focus with oil erasing all overnight gains; World digests the scale of underground damage at Fordow; Tesla launched Robotaxi.

Notes/observations

- President Trump announced that the US had "successfully" struck three nuclear sites in Iran: Fordow, Natanz, and Isfahan. Trump declared that these facilities were “completely and totally obliterated”, while also raising the possibility of "regime change."

- Operation Midnight Hammer may have eliminated Fordow’s IR-1 and IR-6 cascades—roughly 10 000 SWU a year, enough for two to three bombs. Yet, as IAEA Director-General Rafael Grossi warns, “At this time, no one—including the IAEA—is in a position to assess the underground damage at Fordow.”

- US futures now in the green, oil prices erased gains, markets appear to be ignoring largely symbolic Iran parliament vote for closure of Strait of Hormuz, partly due to investors see US air-strikes as the first credible step toward a swift, secular regime change in Tehran—an outcome that could uncap Iran’s 3 million barrels-per-day of sanctioned crude, depress global energy prices, loosen monetary policy, and unlock a $350 billion economy for Western finance and tech in future.

- June flash PMIs paint a cautious European picture: France slid deeper into contraction, while Germany edged toward stabilization and the euro-zone composite barely cleared the growth line at 50.2 amid easing—but still elevated—input costs. Overall momentum remains fragile, with France’s setback offsetting Germany’s tentative up-turn, UK-style services resilience (UK composite 50.7) and cooling price pressures, leaving the region hovering around stagnation as weak demand, energy risks and geopolitics cloud the outlook.

- In other news, Tesla launched Robotaxi service in Austin, while Apple executives reportedly had some internal discussions about potential acquisition of Perplexity.

Asia

- Japan Jun Preliminary PMI Manufacturing: 50.4 v 49.4 prior (1st expansion in 12 months).

- Australia Jun Preliminary PMI Manufacturing: 51.0 v 51.0 prior (6th month of expansion).

- South Korea Jun Exports 20 Days Y/Y: +8.3%e v -2.4% prior; Imports 20 Days Y/Y: +5.3% v -2.5% prior.

Global conflict/tensions

- US B2 bombers hit Iran nuclear sites over the weekend and Iran vowing retaliation. US still assessing the actual damage it inflicted. Iran claiming only superficial damage.

- Senior advisor to Iran's Supreme Leader: Uranium stockpile 'intact' despite US strike (**Note: reports circulated that Iran had moved enriched uranium before US strikes’ to secret location. Satellite images showed a line of trucks in front of the Fordow plant. Some believe, Iran might have moved highly enriched Uranium to another location).

- US stating that any retaliation by the Iranians would be a terrible mistake.

- Iran’s parliament did approve closure of the Strait of Hormuz, a body of water responsible for up to 20M bbls of oil per day (approx 20% of global oil supply). The decision needs to be ratified by Iran's top security body.

- US secretary of State Rubio said to have asked China in convincing Iran not to close the Strait of Hormuz to oil export.

- IAEA Dir Gen Grossi noted that at this time, no one - including the IAEA - was in a position to assess the underground damage at Fordow.

Americas

- Fed’s Daly (non-voter) noted policy was in a "good place" now. Risk to Fed's goals of inflation and employment were roughly balanced, needed to focus on both.

- Fed’s Barkin (non-voter for 2025) saw no rush to cut rates; Not ready to dismiss inflation risks from tariffs.

- Senate slimed down so of the provisions in the Big Beautiful Bill. A vote in the senate was expected in the coming days before it was returned to the house.

Trade

- China May rare earth magnet exports said to have declined m/m to 5-year low. Shipments to the US fell 80% in May while shipments to Japan dropped 54%.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.03% at 536.40, FTSE -0.01% at 8,773.82, DAX +0.04% at 23,335.85, CAC-40 -0.08% at 7,583.69, IBEX-35 +0.15% at 13,866.50, FTSE MIB -0.59% at 39,001.00, SMI -0.20% at 11,874.01, S&P 500 Futures +0.23%].

Market focal points/key themes: European indices opened generally lower, but recovered to trade modestly in the green in the early part of the session; geopolitical uncertainty weighing on risk appetite; among outperforming sectors are energy and technology; sectors inclined to the downside include materials and financials; Spectris to be acquired by Advent, with KKR still interested in making a bid; Assura agrees to be acquired by PHP; Eni sold a stake in its Plenitude unit to Ares; Claranova to sell its PlanetArt unit to Atlantic Park; earnings expected in the upcoming Americas session include Commercial Metals and KB Homes.

Equities

- Energy: BP [BP.UK] +1.0% (former Centrica boss Sam Laidlaw and former BHP chair Ken MacKenzie are among the names being discussed as a potential successor to outgoing chair, Helge Lund - Sky News).

- Healthcare: Roche [ROG.CH] +4.5% (study data), Novo Nordisk [NOVOB.DK] -3.5% (study data) - Industrials: Stellantis [STLA.NL] -1.5% (new leadership structure), Maersk [MAERSKB.DK] -0.5% (Shipping industry analysts: Two empty supertankers Coswisdom Lake and South Loyalty have made a U-turn in Strait of Hormuz so far this morning, which points to higher shipping rates) - Technology: Spectris [SXS.UK] +15.0% (confirms to be acquired by Advent), Prosus [PRX.NL] +1.5% (earnings) - Telecom: Ericsson [ERICB.SE] -2.0% (analyst downgrade).

Speakers

- South Korea Pres Lee said to call for steps to stabilize FX markets if necessary.

- Japan Finance Ministry official noted that majority of participants at investor meeting supported the revised JGB issuance plan.

- Iran army official spokesperson stressed that severe consequences awaited US as the country directly entered into war.

- Iran parliament said to receive draft bill to halt IAEA cooperation.

Currencies/fixed income

- USD and CHF currencies were the main beneficiaries of safe-haven flows. Gold uncharacteristically failed to capitalize on safe-haven demand after the U. joined Israel in striking Iran's nuclear facilities over the weekend. Markets focusing on what Iran would do next which included closing the Strait of Hormuz, ramping up attacks on Israel or retaliating against US targets. Overall sentiment was hope for a potential de-escalation in the conflict.

- EUR/USD hovering around the 1.15 level as various EU PMI readings remained mixed but staying within contraction territory.

- USD/JPY stayed above the 147 level. Yen weakness attributed to the party of Tokyo Gov Yuriko Koike (Tomin First no Kai) gains in local elections as ruling-party LDP underperforms ahead of July's House of Councilors election.

- Brent oil futures gave back all earlier gains and below 77/barrel (**Note: opened in Asia +6%).

- 10-year German Bund yield at 2.54% and 10-year Gilt yield at 4.56%. 10-year Treasury yield: 4.40%.

Economic data

- (NL) Netherlands May House Price Index M/M: 0.6% v 0.7% prior; Y/Y: 9.7% v 10.2% prior.

- (ES) Spain Apr Trade Balance: -€3.9B v -€5.5B prior.

- (CH) Swiss May M3 Money Supply Y/Y: 3.5% v 3.1% prior.

- (FR) France Jun Preliminary Manufacturing PMI: 47.8 v 49.8e (29th month of contraction); Services PMI: 48.7 v 49.1e; Composite PMI: 48.5 v 49.3e.

- (DE) Germany Jun Preliminary Manufacturing PMI: 49.0 v 49.0e (36th month of contraction); Services PMI: 49.4 v 47.9e; Composite PMI: 50.4 v 49.1e.

- (EU) Euro Zone Jun Preliminary Manufacturing PMI: 49.4 v 49.8e; Services PMI: 50.0 v 50.0e; Composite PMI: 50.2 v 50.5e.

- (CH) Swiss Weekly Total Sight Deposits (CHF): 442.5B v 434.8B prior; Domestic Sight Deposits: 430.0B v 426.7B prior.

- (PL) Poland May Sold Industrial Output M/M: -2.0% v -1.2%e; Y/Y: 3.9% v 4.6%e v.

- (PL) Poland May Construction Output Y/Y: -2.9% v -1.1%e v.

- (PL) Poland May Employment M/M: -0.2% v -0.1%e; Y/Y: -0.8% v -0.7%e v.

- (PL) Poland May Average Gross Wages M/M:-4.1 % v -3.8%e; Y/Y: 8.4% v 8.9%e v.

- (PL) Poland May PPI M/M: -0.2% v -0.3% prior; Y/Y: -1.5% v -1.2%e.

- (TW) Taiwan May Unemployment Rate: 3.3% v 3.4%e v.

- (UK) Jun Preliminary Manufacturing PMI: 47.7 v 46.9e (9th straight contraction); Services PMI: 51.3 v 51.3e; Composite PMI: 50.7 v 50.5e.

- (IS) Iceland May Wage Index M/M: 0.2% v 1.8% prior; Y/Y: 8.3% v 8.2% prior.

Fixed income issuance

- None seen.

Looking ahead

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (DE) Germany to sell combined €5.0B in 3-month and 9-month BuBills.

- 05:30 (EU) European Union to sell combined €6.0B in 2029, 2035 and 2051 NGEU Bonds.

- 05:30 (ZA) South Africa announces details of upcoming I/L bond sale (held on Fridays).

- 06:00 (IE) Ireland May PPI M/M: No est v -1.4% prior; Y/Y: No est v -3.6% prior.

- 06:00 (IL) Israel to sell combined ILS2.0B in 2027, 2029, 2030, 2031, 2035 and 2051 bonds.

- 06:00 (BE) Belgium Debt Agency (BDA) to sell €2.9-3.3B in 2030, 2035 and 2040 OLO Bonds.

- 06:00 (RO) Romania to sell RON400M in 6.85% July 2030 bonds.

- 06:00 (NO) Norway announcement on upcoming bond issuance (held on Wed).

- 07:25 (BR) Brazil Central Bank Weekly Economists Survey.

- 08:00 (MX) Mexico Apr Retail Sales M/M: No est v 0.5% prior; Y/Y: -0.4%e v +4.3% prior.

- 08:00 (MX) Mexico Apr IGEA Economic Activity Index (Monthly GDP) M/M: +0.1%e v -0.4% prior; Y/Y: -1.9%e v 2.5% prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:00 (IN) India announces details of upcoming bond sale (held on Fridays).

- 09:00 (FR) France Debt Agency (AFT) to sell €6.1-7.7B in 3-month, 6-month and 12-month bills.

- 09:00 (EU) ECB chief Lagarde.

- 09:45 (US) Jun Preliminary Manufacturing PMI: 51.0e v 52.0 prior; Services PMI: 52.9e v 53.7 prior; Composite PMI: 52.1e v 53 prior.

- 10:00 (US) May Existing Home Sales: 3.95Me v 4.0M prior.

- 10:00 (US) Fed’s Bowman.

- 11:00 (DE) ECB’s Nagel (Germany).

- 11:30 (US) Treasury to sell 13-Week and 26-Week Bills.

- 13:10 (US) Fed’s Goolsbee.

- 14:30 (US) Fed’s Williams.

- 15:00 (AR) Argentina Q1 GDP Q/Q: 1.5%e v 1.4% prior; Y/Y: 6.1%e v 2.1% prior.

- 16:00 (US) Weekly Crop Progress Report.

- 17:00 (KR) South Korea Jun Consumer Confidence: No est v 101.8 prior.

- 19:30 (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence: No est v 86.7 prior.

- 22:00 (KR) South Korea to sell KRW500B in 20-year Bonds.

- 23:00 (TH) Thailand Central Bank to sell THB60B in 3-month bills.

- 23:35 (JP) Japan to sell 20-year JGB Bonds.