US stocks and Treasuries experienced declines as inflation risks took center stage, largely driven by Brent crude surpassing $100 a barrel. This surge in oil prices led traders to increase their expectations for higher global interest rates. S&P 500 contracts fell by 0.4%, while Nasdaq 100 futures dropped 0.6%. In Europe, the Stoxx 600, an index sensitive to economic conditions, decreased by 1.5%.
The fixed income market also saw a downturn, with Treasuries falling across the curve, particularly shorter-dated maturities. The two-year yield rose three basis points to 4.42%, reaching its highest level since 2024. European bonds experienced an even steeper sell-off. The increase in oil prices to a threshold not seen since July comes just days before the latest US inflation figures are released, which are expected to heavily influence the Federal Reserve's decision on a rate hike next week. Money markets are currently pricing in a 65% chance of a rate increase.
Analysts noted that the continued rise in the discount rate presents increasing risks to equity markets, although the potential for sustained AI earnings growth could still propel markets forward. Concerns over persistent inflation, government borrowing, and a wave of corporate bond issuances have pushed global yields to multi-year highs in recent weeks. The Treasury is set to offer $39 billion in 10-year notes, following a $58 billion sale of three-year debt at the highest yield for that tenor since 2024.
Several companies are also making significant financial moves: Uber Technologies Inc. plans to raise €4.5 billion ($5.2 billion) with its debut five-part euro bond, and Amazon.com Inc. launched the sale of its debut sterling bonds. Dow Inc. is reportedly considering exiting its $20 billion chemicals partnership with Saudi Aramco, while Alphabet Inc.'s Google is planning a €13 billion ($15.1 billion) investment in AI infrastructure in Finland. Bitcoin saw a rise of 1.1% to $79,370.35, and Ether increased by 0.7% to $2,501.17.
