Global bond yields held near multi-decade highs on Friday as an oil-price spike tied to the Middle East conflict revived inflation and rate-hike fears. U.S. and European equities clawed back above the week’s lows, while traders raised their bets on a Federal Reserve rate hike.
Bond yields sat near their highest in decades on Friday as expensive oil, stemming from the Middle East conflict, stoked concerns about inflation and rate hikes, while U.S. and European shares edged above the week’s lows. New U.S. tariffs on goods from 60 trading partners did nothing to ease that picture.
Wall Street and Europe edge off the lows
The pan-European STOXX 600 rose 0.3% after a more than 1% drop the previous session, on pace for a mild weekly gain, and Wall Street stock index futures pointed to a slight rebound after Thursday’s weakness. Nasdaq futures inched 0.1% higher, helped by a near 4% premarket jump in chipmaker Intel following strong results.
Yet tech stocks stayed under pressure through the week as investors grew uneasy about multi-billion-dollar AI spending that has yet to prove it pays off. Alphabet and Tesla, the first two “Magnificent Seven” megacaps to report this season, both burned through cash on AI infrastructure in their latest quarter. Algebris Investments’ Gabriele Foa said of U.S. equity valuations that “this is a market where there are (some) bubbly signs”.
An oil spike drives the inflation scare
Brent crude slipped 3% to $97.69 a barrel, after surging 7% overnight to a two-month high of $102. Attacks by Iran-aligned Houthis on Saudi tankers in the Red Sea risk choking off a second crucial Middle East artery for global oil supplies, alongside Iran’s near-closure of the Strait of Hormuz.
Precious metals edged higher in choppy trading. Gold rose 0.3% to $4,060.7 an ounce after falling 2% the day before. Silver advanced 1.2% following a 3.4% decline on Thursday.
Rate-hike bets return
In bond markets, the benchmark 10-year U.S. yield hit a more than 18-month high of 4.7135%, up 14 basis points on the week. Traders now see a one-in-three chance of a rate hike from the Fed as soon as next week, a sea change from a week earlier, while a September move is more than fully priced in.
The dollar index was on pace for its biggest weekly jump in about a month. The yen was pinned near 40-year lows at 163.77 per dollar, drawing warnings about excess volatility from the U.S. Treasury and Japan’s finance minister.
Source: Reuters
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