Global markets gain as oil prices retreat and Treasury yields ease

Global markets started the week on a firmer footing, as a rebound in Treasury markets and a retreat in oil prices helped ease investor sentiment. US equities extended their gains on Monday, with the S&P 500 rising by more than 1.50%, while the Dow Jones Industrial Average and Nasdaq 100 each added over 1%. Sentiment improved after the US refrained from launching strikes on Iran, which eased energy markets and inflation concerns.

According to PSG’s Chief Economist, Johann Els, the Federal Reserve (Fed) has kept its policy rate unchanged, but nominal and real Treasury yields have climbed meaningfully since June 2026, tightening financial conditions without any additional move from the central bank. He explained that because US mortgage rates are closely tied to longer-dated Treasury yields, households are already facing higher borrowing costs and while markets generally prefer clearer policy communication, it is not unusual for market rates to move ahead of official interest rates. Even so, Fed Chair Kevin Warsh’s lag in forward guidance can add unnecessary uncertainty.

The base case remains that the Fed is unlikely to raise rates again in this cycle, provided oil prices continue to moderate. Johann’s view is supported by signs of a slowing US economy, a leading economic indicator that has been weakening since early 2022, a softer labour market and inflation that has continued to surprise modestly on the downside.

On the corporate front, technology shares led the rally as risk appetite returned. Amazon, Alphabet and Microsoft all rose by around 5%, while Nvidia gained 3%. In healthcare, Bristol Myers Squibb surged nearly 10% after reports that AstraZeneca could be considering an acquisition. Semiconductor stocks remained more volatile, however, as investors continued to reassess stretched valuations and speculative positioning. Micron, Texas Instruments and Seagate all closed lower, while SpaceX and AMD each edged about 1% higher ahead of their earnings releases.

European markets also began the new month on a positive note. The pan-European STOXX Europe 600 Index advanced 0.50%, while the Euro STOXX 50 climbed 1.08% to a record closing high of 6 426.50. Germany’s DAX 40 rose more than 1.50%, pushing above the 26 000-point mark for the first time. The UK’s FTSE 100 was the main exception, slipping as AstraZeneca tumbled 9% after reports that it had held merger talks with US-based Bristol Myers Squibb. The suggested deal was met with scepticism, with analysts questioning both its strategic logic and financial appeal.

Sentiment across Europe was helped by a sharp fall in crude oil prices and lower sovereign bond yields, which eased concerns around financing costs. Banks were among the best performers, with UniCredit, Santander, BBVA and BNP Paribas all gaining more than 2%. In Italy, Intesa Sanpaolo rose 2.40% after merger talks between Banca MPS and Banco BPM broke down, fuelling speculation that further consolidation in the sector may follow. Technology shares also had a strong session, echoing gains on Wall Street, with SAP up 4.40% and Deutsche Telekom adding 5% ahead of its latest earnings announcement.

Asian markets finished mixed on Monday as investors weighed currency moves against softer economic data across the region. Japan’s Nikkei 225 fell 0.94% to close at 63 754.90, pressured by a stronger yen following a joint US-Japan statement. China’s Shanghai Composite slipped 0.69% after manufacturing activity expanded at a slower-than-expected pace, while Hong Kong’s Hang Seng bucked the wider regional trend, rising 0.48% to end the day at 26 009.40.

On the home front, Johann added that while US monetary policy will continue to influence the South African Reserve Bank (SARB), its impact is likely to be limited if the US is not entering a sustained interest-rate hiking cycle. Once the temporary inflationary effects of higher oil and fuel prices subside, inflation is expected to move back towards the SARB's 3% target over the next six to 18 months, creating scope for further rate cuts. At the same time, South Africa's improving fiscal position, supported by a sustained primary budget surplus and a debt-to-GDP ratio, should underpin further sovereign credit rating upgrades over time and help cushion the economy against policy uncertainty from the US.

South African equities ended Monday’s session in positive territory. The FTSE/JSE All Share Index gained 1.06%, while the Top 40 Index rose 1.27%. The Resources Index added 2.25%, with the Metals and Mining Index leading the charge, up 3.47%. The rand also strengthened against the major currencies, trading at R16.55 to the US dollar, R22.22 to the British pound, and R19.04 to the euro.

Commodities were mixed. Brent crude fell by almost 5% to $83.57 a barrel, while precious metals were slightly firmer overall. Gold rose 0.18% to $4 048 per ounce at 21h11 SAST, silver gained 0.71%, but platinum slipped by more than 1%.