Global stocks declined on Monday as oil prices climbed amid a deadlock in US-Iran talks, while investors looked ahead to a week of major economic data and monetary policy decisions.
US President Donald Trump rejected an Iranian proposal over the weekend to reopen the Strait of Hormuz, saying Tehran was desperate for an agreement. Trump said discussions would continue this week, although Iran has shown no indication that it will soften its proposals.
Brent crude futures rose as much as 3% to $107.16 a barrel, taking monthly gains to nearly 20%. Oil prices are now almost 50% above their level before the war began in late February, while refined products have recorded even sharper increases.
Limited refining capacity has pushed diesel prices to record highs, raising concerns that elevated energy costs could become embedded in inflation, pricing and wage decisions.
Central banks have responded with a series of interest rate increases, with the Reserve Bank of Australia expected to be the next to tighten policy when it meets on Tuesday.
Markets are pricing in a 68% chance of another Federal Reserve rate hike in October, while about 90 basis points of tightening is priced through the end of next year.
Meanwhile, stronger-than-expected US economic data has supported expectations for corporate earnings, even as rising bond yields continue to influence equity markets.
“The global economy appears to be entering a period of widespread strength seldom witnessed over the past two decades,” said Bruce Kasman, chief economist at JPMorgan.
He said stronger growth and greater confidence in economies’ ability to withstand high energy prices made it unsurprising that interest rates were rising while equity markets remained near record levels.
MSCI’s All-World index fell 0.1% and was on course for a 2.4% quarterly gain. S&P 500 futures declined 0.3%, while Nasdaq futures dropped 0.7%.
European markets were among the stronger performers, with the STOXX 600 rising 0.4%. Defensive sectors such as drugmakers, along with oil and gas stocks, led the gains.
In Asia, Chinese blue-chip stocks fell 1.9% to their lowest level in a year. The decline followed the introduction of legislation by US lawmakers seeking to prevent the federal government from equipping sensitive systems with Chinese-made components used to transmit data in AI data centres.
US Treasury yields also moved higher. The 30-year yield rose two basis points to 5.517%, close to its highest level since 2004, after gaining 27 basis points this month.
Two-year yields have risen 55 basis points in September, marking their biggest monthly increase since February 2023 as markets anticipate further Federal Reserve rate increases.
However, market-based inflation expectations have remained relatively stable and are still below their May highs, according to Steven Major, global macro adviser at Tradition.
He said the rise in nominal Treasury yields was mainly being driven by higher real yields and changing expectations for monetary policy rather than a sharp increase in inflation risk.
Investors are also awaiting a packed US economic calendar featuring data on inflation, gross domestic product, manufacturing and employment.
Recent stronger-than-expected figures have lifted the dollar index to a two-month high of 101.39. The euro fell to $1.1383 and has lost 2% against the dollar this month.
The yen strengthened sharply against the dollar after Japan’s top currency diplomat, Atsushi Mimura, warned against excessive weakness in the currency and signalled his readiness to act. The dollar was last down 0.3% at 156.83 yen.
Gold prices, meanwhile, fell 3% to $4,151 an ounce and are down almost 7% this month as rising yields weighed on the precious metal.
Ojo Triumph
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