Oil and bond yields pressure markets as rate risks intensify

Global markets remained under pressure on Wednesday as rising energy prices and higher bond yields reinforced concerns around inflation and interest rates. Brent crude rose 3.62% to $101.46 per barrel at 21h04 as escalating US-Iran tensions increased concerns over supply disruptions, particularly around the Strait of Hormuz.

US equities traded lower, with the S&P 500 and Dow falling around 0.50%, while the Nasdaq 100 lost almost 1% as technology stocks weakened. Higher oil prices added to inflationary pressures ahead of the Federal Reserve’s meeting next week.

The US 10-year Treasury yield rose towards 4.85%, its highest level since October 2023, after the Treasury Department increased its planned buyback of off-the-run securities to $6 billion. Long-term yields have also been influenced by higher oil prices, record corporate debt issuance and Japanese sales of US Treasury securities amid pressure on the yen. Technology shares remained under pressure, with Alphabet falling 3% and Amazon down 2%, while Meta gained 4.50% after announcing a new artificial intelligence agent.

European equities fell sharply as higher energy prices increased inflation concerns and reinforced expectations of further interest rate increases by the European Central Bank. The Euro STOXX 50 declined 1.70% to 6 304, while the STOXX Europe 600 fell 1.50% to 640. The DAX 40 and CAC 40 dropped 1.70% and 1.90%, respectively, while the FTSE 100 fell more than 1%. Energy and industrial stocks provided some resilience, but weakness was broad-based across banks, technology, luxury, and consumer stocks.

Asian markets were mixed, with Chinese equities edging higher despite renewed inflationary pressures. The Shanghai Composite rose 0.28%, while Hong Kong’s Hang Seng Index was little changed, down to 0.20%, to close at 25 275, as investors remained cautious. Japan’s Nikkei 225 fell 0.19%, with the stronger yen weighing on export-focused companies, while continued gains in oil prices kept inflation and interest rate concerns in focus.

South African equities also declined, with the FTSE/JSE All Share Index falling 0.80% to 116 520.01. Financials fell 1.76%, while Industrials declined 0.68% and Resources slipped 0.18%. At 21h44, the rand weakened 0.25% against the dollar to R16.05, and 0.26% against both the pound and the euro to R21.74 and R18.67, respectively.

Gold rose 1.05% to $4 399.93 per ounce, while silver gained 2.39% and platinum advanced 2.89%.