Global equities retreat on tech caution, rising yields and oil prices

US major indices ended lower on Monday as technology and semiconductor shares weakened alongside higher oil prices and Treasury yields. Technology shares led the decline after executives at US artificial intelligence (AI) companies, including Anthropic, OpenAI and xAI, called for greater caution around the development of increasingly capable AI systems. The comments raised questions about the pace of investment in the sector, with Nvidia falling 2.60%, while Broadcom, Micron Technology and Advanced Micro Devices each declined around 4%. The PHLX Semiconductor Index, which tracks the 30 largest US-listed semiconductor (microchip) companies, fell 5.40%.

Investor attention also turned to the bond market after the 10-year Treasury yield briefly moved above 5% for the first time since 2023. Higher inflation, increased government and corporate borrowing, and concerns about the US fiscal outlook contributed to the recent rise in yields. Markets are pricing in a 90% probability of a 25-basis-point rate hike at this week’s Federal Reserve meeting, according to Reuters, as policymakers weigh inflation risks from higher oil prices.

Crude oil traded at around $102 a barrel after briefly reaching a four-month high of $105. Prices eased after US President Donald Trump said Russia and Ukraine had agreed to halt strikes on each other’s energy infrastructure. However, supply disruptions in the Middle East continued to support prices above $100 a barrel. Saudi Arabia was forced to shut its East–West pipeline after attacks originating from Iraqi territory. Planned talks between the Gulf Cooperation Council (GCC) and Iran, which were intended to explore ways of restoring oil supplies from the region, were subsequently postponed by Tehran.

European equities fell as higher government bond yields and energy prices weighed on sentiment. The Euro STOXX 50 declined 1.10% to 6 257, while the STOXX Europe 600 fell 0.50% to 636. Banks were among the weaker performers, adding to inflation concerns, with Santander, BBVA, Intesa Sanpaolo and Deutsche Bank falling between 1.30% and 2%. ASML and Infineon declined 6.30% and 7.50% respectively, while Schneider Electric and Siemens Energy fell 6.80% and 8.50%.

In contrast, the UK’s FTSE 100 gained 0.40%, outperforming broader European markets. Its defensive composition and gains in energy stocks provided support, with Shell and BP each rising around 1%. GSK climbed more than 4.50% following positive clinical data for a new lung-cancer treatment, while AstraZeneca gained 3.80%. Unilever and British American Tobacco also advanced, gaining 3% and 3.70% respectively.

Asian markets finished mostly lower, with Japan’s Nikkei 225 falling over 0.80% to 63 492.99. SoftBank Group also dropped amid its significant exposure to AI-related investments, while Tokyo Electron declined 1%. Investors remained cautious ahead of the Bank of Japan’s policy decision later in the week. Hong Kong bucked the broader regional trend, with the Hang Seng Index rising 0.36%. In mainland China, the Shanghai Composite was 0.09% lower as investors adopted a cautious stance ahead of the release of August economic data.

South African markets closed sharply lower on Monday, with the JSE All Share Index falling 1.41% to 113 536 as oil prices, a weaker rand – trading at R16.23 at 20h38 against the dollar – and caution ahead of the Fed meeting weighed on sentiment. Resource and mining shares were among the weakest performers, dropping 3.51% and 4.12% respectively, while banks and retailers were also pressured by concerns over higher costs and weaker consumer demand. Sasol was a notable exception, benefitting from the surge in oil prices.

At 20h38, gold fell 0.80% to trade at $4 312.62 per ounce as a stronger dollar and expectations of tighter US monetary policy weighed on precious metals. Silver declined over 1% and platinum was 1.54% lower.