European equity markets ended the session mostly in positive territory, shrugging off another move higher in sovereign bond yields. Italy and Spain led the advance, while the UK's FTSE 100 was the only major index to close lower. The divergence between equity resilience and rising yields underscores the extent to which regional growth expectations and corporate earnings outlooks are currently offsetting tighter financial conditions for European stocks.

As European traders wound down for the day, U.S. stocks came under pressure. Treasury yields moved sharply higher following stronger-than-expected labor market data, and crude oil prices climbed amid escalating Middle East tensions. The combination presented investors with a dual concern: evidence that a robust U.S. labor market could keep the Federal Reserve cautious about aggressive rate cuts, alongside a fresh geopolitical risk premium in energy markets.

Iran is considering a strategic plan that would significantly tighten control over transit through the Strait of Hormuz. The proposal would prohibit passage for vessels associated with the United States, Israel, and other countries deemed hostile, while also imposing restrictions on ships carrying cargo linked to actions against Iran or its allies. The plan further outlines potential financial penalties and cargo seizures for violators, with Iranian authorities and the military taking a larger role in managing navigation and security. Importantly, the plan remains under expert review and has not yet been formally approved or implemented, meaning its final scope and timing remain uncertain. The Strait of Hormuz is one of the world's most critical oil transit chokepoints, with roughly a fifth of global petroleum consumption routinely passing through it, which is why any potential disruption to shipping there reverberates across global energy markets.

European Stock Market Closes

• German DAX: +0.06%
• France CAC 40: +0.35%
• UK FTSE 100: -0.19%
• Spain IBEX 35: +0.62%
• Italy FTSE MIB: +0.44%

European 10-Year Benchmark Yields

European 10-year benchmark yields climbed across the board, reflecting a global move higher in rates that has persisted as investors reassess the pace of expected monetary policy easing on both sides of the Atlantic.

• Germany: 3.148%, +4.3 bps
• France: 3.942%, +4.6 bps
• United Kingdom: 4.953%, +5.8 bps
• Spain: 3.593%, +4.2 bps
• Italy: 3.956%, +7.7 bps

U.S. Stocks

U.S. stocks traded lower, with the Dow leading the declines as investors digested stronger labor market data, higher oil prices on increased tension in the Middle East, and a sharp rise in Treasury yields.

• Dow Jones Industrial Average: -377 points (-0.69%)
• S&P 500: -20 points (-0.26%)
• Nasdaq Composite: -53.5 points (-0.20%)
• Russell 2000: -0.28%
• Nasdaq 100: -127.8 points (-0.43%)

U.S. Treasury Yields

Treasury yields rose across the curve, with short- and intermediate-term maturities posting the largest gains after the day's economic data reinforced expectations that the labor market remains resilient. The moves reflect an ongoing recalibration of expectations regarding the timing and magnitude of potential Federal Reserve rate cuts, with firmer growth and labor data prompting markets to price in a less aggressive easing path.

• 2-year: 4.243%, +6.4 bps
• 3-year: 4.304%, +7.0 bps
• 5-year: 4.391%, +6.7 bps
• 7-year: 4.528%, +6.5 bps
• 10-year: 4.674%, +5.7 bps
• 20-year: 5.222%, +4.8 bps
• 30-year: 5.211%, +3.8 bps

Commodities and Crypto

Crude oil extended its rally, while precious metals came under pressure as higher yields weighed on non-interest-bearing assets.

• WTI crude oil: $77.97, +3.86%
• Gold: -0.55%
• Silver: -1.80%
• Bitcoin: -0.06%

Economic Data

On the economic front, initial jobless claims rose just 1,000 to 199,000 in the latest week, keeping claims below the key 200,000 threshold and reinforcing the view that layoffs remain limited. Claims at these levels are historically low and indicate a labor market that has remained tighter than typical post-recession periods. Continuing claims increased to 1.801 million, but overall the labor market continues to show resilience despite signs of slower hiring elsewhere.

Second-quarter nonfarm productivity increased 1.4% annualized, supported by stronger output and modest growth in hours worked. At the same time, unit labor costs rose just 1.3%, suggesting wage pressures remain relatively contained. The combination of improving productivity and moderate labor-cost growth is a constructive development for the inflation outlook, as higher productivity allows businesses to absorb wage increases without needing to raise prices as aggressively.

Finally, June wholesale inventories rose 0.2%, indicating businesses continued to rebuild stockpiles. However, wholesale sales fell 3.0% during the month, pushing the inventory-to-sales ratio up to 1.19. The combination of rising inventories and weaker sales points to softer demand and could weigh modestly on future production if the trend persists.