Fed minutes highlight inflation risks as Treasury yields and dollar retreat

US equities closed mixed on Wednesday as the Federal Reserve’s (Fed’s) July meeting minutes highlighted continued concern over inflation, while measures to support longer-dated Treasury markets helped ease pressure on bond yields. The S&P 500 gained 0.20% and the Dow Jones Industrial Average rose 120 points, while the Nasdaq 100 fell 0.20%. Retail stocks were mostly higher, while losses in artificial intelligence-related shares and banks weighed on the broader market.

The yield on the 10-year US Treasury note fell to 4.65% from the previous session’s 4.75% as the US Treasury announced it would double its buyback limit for longer-dated securities. The move was aimed at limiting the rise in long-term borrowing costs, while the Treasury also called for greater access to the Fed’s Foreign and International Monetary Authorities repo facility to provide dollar liquidity to foreign countries. The Fed minutes showed that several policymakers remained concerned about persistent inflation, with some believing further rate increases could be required if price pressures fail to ease. However, the minutes predated subsequent data showing cooler employment and inflation.

The US dollar index fell below 99, its lowest level since late May, following the Treasury’s announcement and the pullback in long-term yields. Meanwhile, investors continued to assess the implications of the Fed’s more divided policy outlook.

European markets were mixed. The Euro STOXX 50 declined 0.20%, while the STOXX Europe 600 was flat. Germany’s DAX 40 fell 0.14% to 26 091, while France’s CAC 40 declined 0.09% to 8 502. London’s FTSE 100 bucked the trend, edging higher, supported by gains in mining and energy shares as gold prices strengthened.

Asian markets were weaker, with China’s Shanghai Composite falling 2.40% and Japan’s Nikkei 225 declining 3.16% as semiconductor and technology shares came under pressure. The declines followed renewed selling across the global technology sector.

South African equities ended sharply higher on Wednesday. The FTSE/JSE All Share Index gained 2.41% to 116 051.14 points, while the Top 40 Index rose 2.68%. Resources outperformed, with the Resources 10 Index gaining 6.15% and Metals and Mining advancing 6.83%, while industrials and financials rose 0.90% and 0.55%, respectively. The rand strengthened 1.03% against the US dollar to R16.09, 0.50% against the British pound to R21.90, and 0.19% against the euro to R18.79. South Africa’s 10-year government bond yield eased to around 8.64% after reaching a high of 8.74% on 18 August.

Commodity markets were higher. Brent crude oil rose 0.52% to $91.49 per barrel, while gold gained 3.95% to $4 503.12 per ounce. Silver advanced 4.81% to $66.31 per ounce and platinum rose 5.64% to $1 831.30 per ounce. Renewed tensions in the Middle East continued to raise concerns around energy supply disruptions, while alternative crude routes and higher US refinery activity provided some support to oil markets.