Crude oil prices jumped to a 2-month high amid concerns over the situation in the Middle East. The ongoing political unrest in Syria, and Israel's accusation against Lebanon and Iran and the threat of retaliation have increased the likelihood of oil supply stoppage. Global economy remained lacklustre with US data disappointing the market. The Spanish bond auction was regarded as unsuccessful. In China, the government indicated that it would not relax property control even though economic growth slowed. Wall Street trading was choppy with both the DJIA and the S&P 500 recording modest gains only. Shares in Asia eased after rallying to the highest level since January earlier in the week.
The turmoil in Syria intensified as rebels seized control of the border in Iraq. Meanwhile, Russia and China, two of the five permanent members of the UN Security Council, vetoed resolution to sanction against Syria for the third time in nine months. To China, the resolution is a tool for Western countries to get the green light for their military intervention while Russia warned that the sanctions, if approved, would open the path to the pressure of sanctions and further to external military involvement in Syrian domestic affairs. The US said that the decision of Russia and China is highly regrettable.
Israel blamed Hezbollah, a Lebanese organization backed by Iran, for bus bombing in Bulgaria which has killed seven people, among which five were Israelites. Israeli Prime Minister Benjamin Netanyahu said the attack was perpetrated by Hezbollah, Iran's leading terrorist proxy and his government would continue to fight against Iranian terror and would act against it with great force. The UN Security Council today condemned the attack and said in a statement that any acts of terrorism are criminal and unjustifiable, regardless of their motivation, wherever, whenever and by whomsoever committed.
In Spain, investors were not enthusiastic about the auctions of the 2-year, 5-year and 7-year bonds. This has sent the 10-year bond yield to above 7%. The auction result has raised doubt about whether the country could avoid tapping funding from the EU/IMF again.
On the macro front, the US data came in worse than expected. The Philly Fed Index improved to -12.9 in July from -16.6 a month ago. This was weaker than market expectations of a rise to -8. Moreover, a negative reading signaled that the district continued to see contraction in the manufacturing sector. Initial jobless claims surprisingly rose +34K to 386K in the week ended July 14 while the figure in the prior week was revised higher. Existing home sales dropped to 4.37M in June, following the upward revision to 4.62M in May. Meanwhile, leading indicators unexpectedly dropped -0.3% in June after gaining +0.4% a month ago.