US equities retreat as September gets off to a cautious start

US equities ended September’s first trading session on a softer note on Tuesday, as rising bond yields and higher oil prices weighed on investor sentiment. The S&P 500 fell 0.70%, while the Dow declined by 419 points and the Nasdaq 100 dropped 1.30%. The cautious tone reflected both seasonal headwinds – September has historically been one of the weaker months for stocks – and a shift in the macro backdrop, with expectations for near-term interest-rate cuts fading and renewed Middle East tensions rising.

US Treasury yields climbed to their highest levels in several months as investors priced in the prospect of higher-for-longer rates alongside increased government borrowing. Technology shares were among the weaker performers, with Micron falling 2.60% and AMD declining 2.40%. Oracle and Palo Alto Networks each lost 5.20%, while Dell dropped 6.80%. Broadcom slipped 0.42% ahead of its results, while the broader market digested the combined impact of elevated yields, firmer oil prices and ongoing geopolitical uncertainty.

According to Reuters, renewed US strikes on Iranian targets have intensified concerns around energy supplies, pushing crude prices higher and complicating the inflation outlook. Crude oil futures rose to around $90.50 a barrel on Tuesday, marking their highest level in more than a month, while Brent futures climbed 4.30% to more than $94 a barrel, also reaching a one-month high. Escalating hostilities between the US and Iran have heightened the risk of prolonged disruption to exports through the Strait of Hormuz, keeping a firm bid under energy markets.

Major economies have also been drawing on their oil reserves to offset higher import costs, with the US Strategic Petroleum Reserve falling below 290 million barrels, its lowest level since 1982. Meanwhile, China has cut both crude imports and refinery activity, suggesting softer demand for crude despite relatively steady demand for refined products. In other commodities, precious metals dropped with gold 5.68% lower trading at $4 340.75 per ounce and silver declining 3.04%.

European equities came under further pressure on Tuesday, marking a second consecutive session of declines as investors remained concerned that tighter financial conditions could weigh on economic growth. The Euro STOXX 50 fell 0.90% to 6 365, while the STOXX Europe 600 declined 0.60% to 647. The FTSE 100 also slipped 0.40%, although it outperformed its European peers. With energy costs already contributing to a rise in eurozone headline inflation, markets are increasingly pricing in the possibility of the European Central Bank factoring in a rate hike this month.

Technology stocks were among the weakest performers, with SAP, Prosus and Adyen falling between 2.60% and 4%. Industrial shares also came under pressure, with Siemens, Schneider Electric and Rheinmetall each losing around 2.50%. Novartis was a notable exception, jumping 6.30% after announcing positive results from two late-stage trials of its experimental treatment for multiple sclerosis.

Asian markets ended the day’s session on a mixed note, as investors remained cautious amid rising global bond yields and global geopolitical tensions. Japan’s benchmark 10-year government bond yield rose to 3% for the first time in 30 years, reflecting growing concerns about inflation and the outlook for interest rates.

In mainland China, the Shanghai Composite edged 0.09% lower, although stronger-than-expected factory activity helped limit the decline. Meanwhile, Premier Li Qiang indicated that US companies are welcome to expand their presence in China, while calling for both countries to address each other’s concerns. The Nikkei 225 slipped 0.15%, with weakness in semiconductor and growth stocks weighing on the index. In Hong Kong, the Hang Seng fell 0.88%, dragged lower by technology and property stocks, while global e-commerce fashion platform, Shein’s subdued market debut also dampened sentiment.

The South African rand weakened on Tuesday after the latest purchasing managers’ index (PMI) survey pointed to a further deterioration in manufacturing conditions. The rand traded at R16.16 against the US dollar, around 0.33% weaker, at 20h19 SAST. The seasonally adjusted Absa PMI fell to 45.8 points in August from 46.8 in July, marking its fourth consecutive monthly decline and its weakest reading so far this year. The survey also showed a sharp slowdown in business activity.

Meanwhile, rising diesel costs are likely to keep pressure on manufacturers’ input costs, with another price increase expected during September. The weaker economic backdrop also weighed on the Johannesburg Stock Exchange (JSE), with indices closing in the red. The All Share Index decline 0.35% at 115 855.50, while Financials ended 0.53% lower.