Global stocks experienced a downturn as Brent crude oil prices neared $100 a barrel, intensifying worries about inflation and suggesting that central banks might need to raise interest rates further. The S&P 500 was set to open 0.2% lower, following declines in European and Asian markets. Brent crude spiked by 1.32% to $98.28 a barrel, reaching its highest level in six weeks, after Saudi Arabia reported halted operations at several energy facilities in the kingdom's south due to attacks. Strong Chinese purchases also contributed to the tightness in oil markets, further driving prices.
Despite the broader market decline, chipmakers showed resilience and outperformed, benefiting from sustained investor interest in artificial intelligence. HSBC's Willem Sells noted that US stock valuations still undervalue the potential productivity and earnings growth driven by AI. Conversely, the Dow Jones Industrial Average dropped 1.21% in the first hour of trading after a holiday weekend, and the Nasdaq Composite fell 0.52%. Money markets indicated over a 50% chance of a Federal Reserve rate increase this month.
In currency markets, the Japanese Yen strengthened by as much as 1% to below 154 against the US dollar, reaching its highest level since February. This was supported by expectations of more restrictive policies from the Bank of Japan and technical momentum. Bond markets also saw movement, with Treasuries slipping ahead of a $58 billion auction of three-year notes. This week includes additional offerings of 10- and 30-year notes, while the UK faced its highest borrowing costs on a debt sale since at least 1998. Copper's rally, hitting a record for a second consecutive session, also added to inflationary pressures from commodities.
