Oil Above $90 Pressures S&P 500 Ahead of Tech Results

Summary

Brent crude climbed above $90 a barrel, adding pressure on the S&P 500 as higher Treasury yields weighed on technology valuations. US stock futures edged higher despite continued weakness in semiconductor shares after TSMC's post-results decline and further losses in South Korea's chip sector. Sterling held steady against the US dollar as markets awaited the UK's new Treasury appointment. Expectations for a September Federal Reserve rate rise also firmed as bond yields moved higher.

Equities

The FTSE 100 closed 0.3% higher on Friday at 10,600.4, supported by gains in utilities and energy shares as higher oil prices lifted the sector. The FTSE 250 fell 0.5%, ending a six-session winning streak, although both UK indices finished the week higher overall. Political developments also remained in focus after Andy Burnham was elected leader of the Labour Party, paving the way to become the UK's next prime minister.

Energy shares closed 2.1% higher on Friday as crude prices climbed following fresh escalation in the Middle East. Utilities led sector gains with a 2.7% rise, while food, beverage and tobacco stocks added 1.6%. Travel and leisure shares fell 0.9% as higher fuel costs weighed on sentiment, while banks slipped 0.4% and investment banking and brokerage stocks lost 1.5%.

Burberry shares closed 6.4% lower on Friday after the luxury retailer warned that conflict in the Middle East had reduced tourist spending across Europe. The company nevertheless reported strong sales growth in the United States and China during the April to June quarter. GSK finished 2% lower after announcing it would discontinue development of an experimental treatment for refractory chronic cough after a late-stage clinical trial failed to meet its main efficacy targets.

In the United States, Wall Street ended lower on Friday and posted weekly losses as weakness in semiconductor shares spread more broadly across the market. The Dow Jones Industrial Average closed 0.77% lower, the S&P 500 fell 1.01% and the Nasdaq Composite lost 1.40%. The Philadelphia Semiconductor Index dropped into bear market territory, finishing more than 20% below its June peak despite remaining sharply higher for the year.

Netflix shares closed 7.3% lower after the streaming company issued an earnings forecast that disappointed investors. Intuitive Surgical tumbled 14.2% after keeping its procedure growth outlook unchanged and warning that changes to insurance coverage could delay patient treatment. Uber Technologies fell 2.1% after announcing a deal worth nearly $15 billion to acquire Germany's Delivery Hero, while Meta Platforms dropped 2.7% and Alphabet declined 3.2% as continued selling pressure weighed on large technology stocks. Early second-quarter earnings remained encouraging overall, with 90% of the first 49 S&P 500 companies to report beating analysts' expectations.

Forex & Commodities

Early on Monday, the US dollar eased after three consecutive sessions of gains as confidence improved slightly despite continuing conflict in the Middle East. The US dollar index slipped to 100.7, while the euro strengthened to 1.144. Sterling also moved higher to 1.346 against the US dollar as political developments in the UK remained in focus following preparations for Andy Burnham to replace Keir Starmer as prime minister. The Japanese yen traded around 162.3 per US dollar in holiday-thinned trading, while the Australian and New Zealand dollars both advanced to 0.6996 and 0.5858 respectively.

Spot gold edged lower to $4,005 per ounce as investors weighed higher oil prices alongside changing expectations for US interest rates. Silver traded higher at $56.61 per ounce, while platinum slipped to $1,587 and palladium eased to $1,244.

Oil prices continued their strong advance early on Monday after renewed military action between the US and Iran raised concerns over supplies through the Strait of Hormuz. Brent crude climbed above $90.87 per barrel, while West Texas Intermediate reached $84.84, both standing at their highest levels since June. Shipping activity through the Strait remained subdued over the weekend, with only a handful of vessels completing the passage as security risks persisted.