Markets lower as higher yields revive pressure on equities

US stock indices retreated from record highs on Wednesday as renewed concerns over elevated bond yields weighed on credit-sensitive sectors. The S&P 500 and Nasdaq 100 each fell 0.30%, while the Dow Jones Industrial Average declined 0.60%. Artificial intelligence (AI) infrastructure stocks came under pressure, with Micron, Advanced Micro Devices, Oracle, Lam Research and Applied Materials among the decliners. Nvidia fell 1% and SpaceX declined 3%, despite reports that SpaceX plans to raise $40 billion to purchase Nvidia chips. Pharmaceutical and consumer staples stocks, meanwhile, gained.

The 10-year US Treasury yield stood at 5.28%, easing 8 basis points (bps) from a 24-year high reached earlier in the session following a strong Treasury auction. However, long-term yields remained close to their highest levels since the start of the millennium amid elevated inflation risks, robust economic growth, widening budget deficits and high levels of corporate debt issuance. Minutes from the Federal Reserve’s (Fed) September meeting showed broad agreement that higher rates were needed to contain inflation, while most policymakers judged that another increase in the federal funds rate target range would likely be appropriate by year-end. The minutes also indicated that all policymakers supported the 25-bp increase in September to a range of 3.75%-4%. More than 80% of rate futures market participants were positioned for at least one further increase by year-end.

Crude oil eased below $89 a barrel during the session as signs of improving Middle Eastern supply reduced some concerns over global availability. Saudi Arabia lowered official selling prices for its flagship crude grade and said its East-West pipeline was operating at full capacity, while higher export volumes from regional OPEC+ producers also pointed to improving supply. Shipping costs nevertheless remained elevated following reported attacks on vessels in the Strait of Hormuz.

European markets fell sharply as rising energy prices and bond yields weighed on sentiment. The Euro STOXX 50 declined 1.60% and the STOXX Europe 600 fell 1.10%, while the DAX, CAC 40 and FTSE 100 lost 1.40%, 1.20% and 0.81%, respectively. Financial stocks were among the weakest performers, with Deutsche Bank falling 5%, while BNP Paribas, Intesa Sanpaolo and UniCredit each declined around 4%.

Asian markets also weakened. The Hang Seng Index fell 0.60% to 24 131, while the Nikkei 225 declined 0.92% to 70 035. Technology and AI-related shares were among the weaker performers. Mainland Chinese markets remained closed for the National Day holiday, with the Shanghai Stock Exchange's multi-day closure continuing through Wednesday and normal trading scheduled to resume today (Thursday, 8 October).

In South Africa, the JSE All Share Index fell 1.63% to 107 104.29, while the JSE Top 40 declined 1.75% to 99 394.06. The JSE Resources 10 and Metals and Mining indices fell 2.32% and 2.75%, respectively, while the Industrial 25 and Financial 15 declined 0.51% and 2.23%. The rand weakened 0.49% against the US dollar to R16.62 and 0.10% against the pound to R21.96, while it was broadly unchanged against the euro at R18.61.

At 21h26 SAST, gold fell 1.13% to $4 107.36 an ounce, silver declined 3.19% to $59.71 and platinum fell 4.17% to $1 638.55. Brent crude was 0.29% higher at $100.87 a barrel.