US equities fell on Tuesday as bond yields jumped and geopolitical risk intensified. The S&P 500 lost 0.7%, the Nasdaq Composite dropped 1.0% and the Dow Jones declined 0.8%. The yield on the 10-year US Treasury note climbed to around 4.8%, its highest level since January 2025, while the 30-year yield moved close to 5.3%. The move was not confined to the US: Japan’s 10-year government bond yield touched 3% for the first time since 1996, and yields across European government debt markets rose in tandem.
Defensive sectors held up better than the broader market, with energy, healthcare and utilities stocks outperforming, while technology, consumer discretionary, industrials and materials names lagged. Renewed US-Iran hostilities and reported attacks on shipping through the Strait of Hormuz pushed oil prices sharply higher, with WTI crude rising 5.9% to $90.83 a barrel and Brent gaining 5.3% to $95.32, raising concerns that higher energy prices could reinforce inflationary pressures and complicate the outlook for interest rates. Underlying economic data remained relatively resilient: US job openings rose to 7.27 million in July, and the August ISM manufacturing index stayed in expansion territory at 54.6, even as new orders moderated. Markets consequently increased expectations of a September Fed rate hike, adding further upward pressure on yields and creating a more challenging near-term environment for equity valuations.
Asian and European markets extend losses
Asian equities slide as oil-driven inflation fears mount
Asian markets fell sharply on Wednesday, extending Wall Street’s losses as surging oil prices fuelled inflation concerns and expectations of further rate hikes. South Korea’s KOSPI dropped more than 3% and Japan’s Nikkei fell 2.6%, with weakness spreading across the wider region as rising global bond yields added to the strain. US index futures were little changed in after-hours trading, with S&P 500, Nasdaq 100 and Dow futures broadly flat. Markets remained cautious amid renewed US-Iran strikes, elevated oil prices and rising Treasury yields, with investors also awaiting Friday’s non-farm payrolls report for further guidance on the likely path of Fed policy.
European stocks fall for a second session as ECB hike bets firm up
European equities also declined for a second straight session, with the Euro STOXX 50 down 0.9% and the broader STOXX Europe 600 off 0.6%, as higher energy prices fuelled inflation and reinforced expectations of an ECB rate hike this month. SAP, Prosus and Adyen were among the notable decliners, alongside Siemens, Schneider and Rheinmetall. Novartis was a standout gainer, up 6.3% on the back of positive clinical trial results.
Currencies, commodities and eurozone inflation
US dollar strengthens as rate-hike odds rise
The US dollar strengthened broadly, with the Dollar Index climbing above 99.7 to its highest level in nearly three weeks. The move was supported by higher oil prices, renewed inflation concerns and firming expectations of a September Fed rate increase. EUR/USD slipped to 1.1579, reflecting both the dollar’s broader strength and a more cautious tone across markets.
Oil extends gains for a third session on Hormuz disruption
Oil prices rose for a third consecutive session, with Brent crude up 1.6% to $96.18 a barrel and WTI crude up 1.6% to $91.65. Renewed hostilities between the US and Iran, together with severely reduced tanker traffic through the Strait of Hormuz, intensified concerns over a prolonged disruption to global energy supply. A 2.6-million-barrel fall in US crude inventories added further support to prices.
Eurozone inflation hits a three-year high
Eurozone inflation accelerated to 3.3% in August, up from 2.9% in July, its highest reading since September 2023 and well above the ECB’s 2% target. Energy inflation surged to 14.3% as Middle East tensions fed through to fuel costs, while core inflation eased to 2.4%. Markets are now fully pricing in a 25-basis-point ECB rate rise at this month’s policy meeting.
Stocks on the move
Technology and AI names dominate the headlines
Dell Technologies raised its full-year revenue and profit guidance for the second time this year on the back of strong demand for AI servers and data-centre infrastructure. Second-quarter revenue and earnings beat expectations, and the company lifted its AI-server revenue outlook by a wide margin, sending shares up almost 9% in after-hours trading, extending strong gains this year. Palo Alto Networks beat fourth-quarter earnings and revenue estimates and issued fiscal 2027 guidance ahead of forecasts, while also announcing the acquisition of AI-native platform Console to help automate threat detection and remediation as AI adoption creates new categories of risk. Despite the beat, its shares slipped almost 2% in after-hours trading.
John Ternus formally started his tenure as chief executive, calling next week’s iPhone launch “phenomenal” while expressing confidence in the company’s future products, and thanking Tim Cook for his 15 years of leadership and support during the transition. Apple is expected to unveil its first foldable iPhone alongside an expansion into smart home devices. Elsewhere in AI, OpenAI is reportedly closing in on the launch of its next model, Astra, which chief executive Sam Altman has described as a significant advance in both capability and alignment, with the company placing greater weight on cybersecurity safeguards, reflecting growing concerns over AI agents breaching testing environments and the need for stronger safety measures as models become more capable. Alphabet is said to be preparing to launch Gemini 3.8 Flash as early as Wednesday, aimed at improved coding performance and more direct competition with OpenAI and Anthropic. Internal testing has reportedly shown promising results, while the model’s smaller architecture should allow faster development and deployment. Alphabet shares rose around 0.6% in after-hours trading on the news.
Industrials, energy and pharma see major corporate developments
Blue Origin secured a $700 million NASA contract to build the Mars Telecommunications Network, including a telecommunications orbiter to support communications, navigation and data transmission for current and future Mars missions, with delivery due by December 2028 and the network expected to become operational around Mars by 2030. Elliott Investment Management has built a stake in Air Liquide and is pushing the French industrial-gases group to close its persistent margin gap with rivals, particularly Linde, with investors looking for greater cost discipline, portfolio simplification and potential buybacks ahead of the company’s October investor day, which could provide further details on plans to improve profitability and shareholder returns.
Technip Energies shares jumped on reports that it is a leading contender for a potential $10 billion SpaceX contract to build rocket-fuel production facilities in Louisiana, supporting SpaceX’s planned $100 billion base and Starship programme. Technip’s existing Louisiana operations and LNG expertise strengthen its position in the tender. Volkswagen’s management board is reportedly preparing to propose ending production at four German plants between 2031 and 2034, according to WirtschaftsWoche, with Emden and Zwickau potentially closing in 2031, Hanover in 2032 and Neckarsulm in 2034; the supervisory board is due to discuss the plans on Friday, though Volkswagen has declined to comment. On the pharmaceutical side, Novartis said its oral multiple sclerosis drug remibrutinib met the primary goals of two late-stage trials, outperforming Sanofi’s teriflunomide in reducing relapse rates and slowing disability progression. The drug was well tolerated, with no liver safety concerns identified, and Novartis plans to seek global regulatory approval and present full results at an upcoming medical conference. Reckitt gained after a US jury ruled in favour of its Mead Johnson unit in baby-formula litigation; JPMorgan also upgraded the stock to Overweight, citing improving litigation prospects and an attractive core-business valuation. Core sales growth reached 4%-5% in Q2, while stronger emerging-market demand and product innovation support further growth.
Analyst upgrades and downgrades shape sentiment
Morgan Stanley upgraded Robinhood to Overweight and raised its price target to $150 from $124, citing stronger customer economics, a broader product suite and rising monetisation across its 28 million users, with the bank forecasting 23% annual revenue growth through 2028, with prediction markets and new products providing further catalysts. Piper Sandler upgraded Tempus AI from Neutral to Overweight and lifted its price target to $76 from $56, pointing to the Personalis acquisition and its MRD platform, positive INTerpath-001 trial results and FDA approval of its tumour-only xT CDx test, supporting unified ADLT pricing and longer-term growth. Evercore ISI upgraded Duolingo to Outperform and more than doubled its price target to $210, citing accelerating user growth, improved products and stronger retention, raising its 2027 and 2028 earnings estimates above consensus, while flagging AI competition as a continuing risk; Duolingo shares closed at $146.98 on 31 August. In banking, Bank of America upgraded Lloyds to Buy and downgraded Barclays to Neutral on rising UK banking competition, viewing Lloyds as best placed on the strength of its deposit franchise, cost control and broader product offering, while keeping NatWest at Buy. BofA raised targets for Lloyds and NatWest, while cutting Barclays’ target and earnings forecasts.
What to watch next
In the US, investors will watch the ADP employment report, factory orders and the Federal Reserve’s Beige Book, alongside Canada’s interest rate decision. On the earnings front, results are due from Broadcom, Costco, Snowflake and Hewlett Packard Enterprise, while Fast Retailing reports sales and revenue. Australia’s July trade balance also features on the calendar.
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