US bond yields hover near multi-decade highs

Summary

US long-term bond yields steadied near multi-decade highs after a sharp selloff driven by concerns over persistent inflation and government borrowing. Alphabet’s latest bond sale attracted strong demand, while investors remained focused on whether higher borrowing costs could weigh on equities. UK inflation rose to 2.9% in July from 2.6%, while markets awaited further signals on US monetary policy.

Equities

The FTSE 100 rose 0.1% on Tuesday to close at 10,728.04, ending a six-session losing run after touching a three-week closing low on Monday. The FTSE 250 fell 0.6% to 24,561.43.

Energy shares moved higher on Tuesday as crude oil prices climbed above $90 a barrel. BP gained 2.7% and Shell rose 1.8%, while AstraZeneca added 2.1% and GSK climbed 2%.

Kainos Group jumped 22% on Tuesday after the IT software provider issued a fiscal 2027 earnings forecast that beat market expectations. Japan-focused investment trusts were weaker, with JPMorgan Japanese falling 3.7% and Baillie Gifford Japan Trust dropping 2.1% after Japan’s benchmark bond yield reached a three-decade high.

In the US, the S&P 500 fell 0.69% on Tuesday to close at 7,691.76, while the Nasdaq Composite dropped 1.33% to 26,289.71. Both recorded their largest daily percentage declines since 29 July, while the Dow Jones Industrial Average declined 0.22% to 53,343.40.

Semiconductor shares suffered some of the sharpest falls during Tuesday’s session, with the Philadelphia Semiconductor Index down 5%. Micron Technology dropped 7% after gaining almost 18% over the previous five sessions, while Nvidia fell 2.3% ahead of its upcoming quarterly results.

Data-storage companies were also hit hard on Tuesday, with Sandisk falling 9% and Western Digital losing 7.4%. The wider S&P 500 information technology sector declined 1.9%, while the energy sector gained 1.8%.

Home Depot slipped 0.1% on Tuesday despite beating second-quarter sales estimates. Investors are now awaiting Walmart’s results later this week and Nvidia’s forthcoming quarterly report, which will provide fresh figures on demand for AI-related chips.

Forex & Commodities

The US dollar remained close to multi-month lows against major currencies early on Wednesday, with the dollar index slipping to 99.55. The euro strengthened to $1.159, remaining close to the two-month high reached earlier this week, while sterling rose to $1.354 and held near a three-month high.

The Japanese yen strengthened early this morning to 159.3 per dollar, moving away from the 160 level after giving back much of the gains made following joint US-Japanese intervention at the end of July. The Australian dollar weakened to $0.7069, while the New Zealand dollar was little changed at $0.5874.

Spot gold rose early this morning to $4,357 an ounce, recovering some ground after falling nearly 2% on Tuesday. The precious metal remained below the levels seen at the start of the week, when it had traded above $4,390 an ounce.

Silver slipped early on Wednesday to $63.03 an ounce, while platinum rose to $1,720 and palladium held steady at $1,289.

Oil prices extended their advance for a fourth consecutive session early on Wednesday. Brent crude rose to $91.71 a barrel, while US West Texas Intermediate climbed to $85.70, extending gains after both benchmarks closed on Tuesday at their highest levels in more than three weeks.