Geopolitical Tensions Escalate in Middle East as Markets Waver; Trade and Economic Data Also in Focus

Israeli airstrikes have intensified across Syria, with Syrian state media reporting that one person was killed and eighteen wounded in Damascus. The Israeli military confirmed striking the entrance of the army headquarters in Damascus, near the presidential palace, stating the actions were intended to send a "clear message" and that Israel will not permit military build-up on its border with southern Syria. The Israeli Defense Forces (IDF) Chief has ordered the diversion of forces to the north, and an Israeli political source indicated U.S. involvement in attempts to de-escalate the situation with Syria.

U.S. stock markets showed initial strength at open but later retreated, with the S&P 500 (SPX) gaining 16.51 points (0.26%) to 6,260.27 and the Dow Jones (DJI) up 155.06 points (0.35%) to 44,178.35. However, the S&P 500 later lost its early gains, and the Nasdaq 100 (NDX) dropped by 0.3%, reflecting a volatile trading session.

Trade tensions between the EU and China remain a significant concern, particularly for the automotive sector. The China Chamber of Commerce to the EU Auto Group voiced worries about increasing EU policy risks for foreign companies and investments, asserting that the EU's tariffs on Chinese electric vehicles contradict climate goals. Despite these concerns, the group anticipates positive outcomes from ongoing China-EU discussions. Separately, market watchers have warned about the potential for the U.S. to impose 30% tariffs on the EU, further complicating global trade dynamics.

U.S. Industrial Production demonstrated a positive rebound in June, rising by 0.3% month-over-month, surpassing the estimated 0.1% and recovering from a previous decline. Manufacturing production also increased by 0.1%, while capacity utilization reached 77.6%, indicating an uptick in economic activity.

Energy markets are facing disruptions due to drone strikes in Iraqi Kurdistan, which have led to a significant reduction in oil output by 140,000-150,000 barrels per day, according to energy officials. In corporate news, German defense contractor Rheinmetall (RHM) is reportedly seeking a buyer for its automotive division. Meanwhile, Fitch Ratings anticipates further recovery in French bank profits following the latest Livret A rate cut.