Markets mixed as oil prices surge and investors weigh rate decisions

US equities closed lower on Tuesday, with the S&P 500 falling 0.40%, the Nasdaq Composite declining 0.60% and the Dow Jones Industrial Average dropping 328 points. Technology and industrial stocks remained among the main drags, while communication services was a notable exception, gaining 2.80%. Losses were broad-based, with credit-sensitive artificial intelligence (AI) hyperscalers coming under pressure from rising borrowing costs. Alphabet fell 1.30%, Microsoft declined 1.60%, Oracle dropped 3.10% and Amazon lost 2%. Chipmakers were mostly higher following Monday’s sell-off, when Anthropic CEO Dario Amodei called for slower AI development to mitigate risks associated with increasingly capable models. Nvidia gained 0.60%, while Advanced Micro Devices rose 2.20%.

Attention remained firmly on the Federal Reserve ahead of the policy decision. The 10-year US Treasury yield briefly moved above 5%, reaching its highest level since 2007, before settling at 4.99%. The rise in yields reflects expectations of higher interest rates, resilient economic growth and concerns over the US fiscal outlook. The dollar also strengthened, with the dollar index rising 0.14% to 99.63, while the MSCI World Index declined 0.53%.

European equities extended the previous session’s losses as surging energy prices and rising bond yields weighed on sentiment. The Euro STOXX 50 fell 0.40% to 6 236, while the STOXX Europe 600 declined 0.30% to 634. Germany’s DAX 40 pared earlier losses but still ended 0.20% lower at 25 402, marking its second consecutive decline. In the UK, the FTSE 100 fell 0.40%, with weaker employment data adding to the pressure. Higher energy prices continued to raise concerns about inflation and the outlook for interest rates, while financial stocks were also affected by rising yields. UniCredit and Deutsche Bank both fell more than 2%, while luxury stocks LVMH and Hermès declined close to 2.50% following weaker-than-expected Chinese retail sales.

Asian markets closed mixed following an overnight sell-off in US technology stocks and elevated oil prices. The Nikkei rose 0.90%, supported by a rebound in SoftBank, while the Hang Seng and Shanghai Composite declined 0.40% and 0.10%, respectively. Sentiment towards Chinese equities was also weighed down by weaker retail sales, which rose 0.40% year-on-year in August, below the 0.80% expected. The figures pointed to subdued consumer spending and an uneven recovery in China, raising concerns about its potential impact on global growth.

South African equities ended the day slightly higher, with the broader market recovering from early losses despite continued geopolitical tensions and weaker precious metals. Financial stocks – 0.43% higher – provided some support, assisted by expectations around domestic interest rates and improved banking margins. Resource shares, however, remained under pressure, dropping by 0.30% as softer gold and precious metal prices weighed on the mining sector. Industrials held up relatively well, rising 0.59%, with rand-hedge stocks such as Naspers and Prosus benefiting from firmer Asian technology shares, including Tencent.

Retail stocks were less resilient as rising fuel costs added to concerns about household spending and inflation. The benchmark 2035 government bond yield also rose by around 6.5 basis points to approximately 8.80%–8.89%, as higher global yields and currency weakness added to pressure across local markets. The rand weakened moderately (0.05%) against the US dollar, trading at R16.26 at 19h25 SAST.

Oil prices climbed above $105 a barrel, reaching their highest level in more than four months as concerns over supply disruptions in the Middle East intensified and Libyan production faced fresh setbacks. With shipments through the Persian Gulf already restricted by the Iranian blockade, the disruption has further tightened regional supply and prompted major OPEC producers to reduce output, with Saudi production falling to its lowest level since 1990. These developments have heightened concerns about the availability of crude and provided further support for oil prices.

Meanwhile, at 18h21 SAST, Brent crude increased by 2.41%, trading at $108.23 per barrel, while precious metals were mixed, with gold lagging at 0.10% lower to trade at $4 293.70 per ounce. Silver, on the other hand, increased slightly by 0.28%, selling at $63.40 per ounce.