NEW YORK/LONDON: Global stocks fell on Monday as a surge in oil prices and rising government bond yields weighed on risk appetite ahead of central bank meetings in the United States and Japan this week.
On Wall Street, technology and industrial stocks led declines across the three major indexes. Artificial intelligence-related shares also came under pressure after the leaders of OpenAI and Anthropic called for a slowdown in AI development to manage risks and protect humanity.
The Dow Jones Industrial Average fell 0.29%, the S&P 500 fell 0.48% and the Nasdaq Composite fell 0.56%.
The Philadelphia chip index dropped 5.9%.
In Europe, the STOXX 600 fell 0.49% as gains in oil and gas stocks were offset by losses in tech, which were swept lower after the concerns expressed in a letter by Anthropic CEO Dario Amodei, echoed by Elon Musk, who runs xAI, and Sam Altman, CEO of OpenAI.
MSCI's gauge of stocks across the globe fell 0.65%.
Markets "are down but surprisingly resilient given the wall of worry, including rates, oil prices, Fed uncertainty and the AI build-out discussion," said Mark Hackett, chief markets strategist at Nationwide.
"The news has focused on the negative," Hackett said. "... Overall, the market is quite resilient but will likely churn sideways until we get some resolution on the Fed uncertainty and the inflation pressure conversation along with September seasonality. The breakout is unlikely until October, but with macro trends and earnings strength that is the most likely outcome."
OIL PRICE SPIKE
Brent futures settled up 1% at $105.68 a barrel, having gained almost 9% last week. Prices for diesel, gasoline and jet fuel are all far higher than they were before the Iran war, meaning a direct hit for consumers.
Saudi Arabia's East-West Pipeline was temporarily shut following a drone attack, according to Saudi officials. The shutdown of the pipeline, which helps Saudi Arabia avoid the Strait of Hormuz by re-routing oil to the Red Sea, threatens up to 4% of global oil supply.
"There's been no real equity-market drama in the face of 5% yields and high oil prices. But, clearly, one thing we have to add to the mix is that if the disruption in Hormuz continues, we're going to have to add a couple of hikes by central banks, which is what the market is pricing," Lombard Odier chief economist Samy Chaar said.
BOND YIELDS RISE
Government bond yields edged higher after posting their worst weekly performance since mid-May last week.
Benchmark 10-year U.S. Treasury yields touched 5% for the first time since 2023, while Germany's 10-year bond yield climbed above 3.51%, its highest level since 2009.
Traders now attach a 90% probability of the Federal Reserve raising rates on Wednesday in what could be its first hike since mid-2023. The European Central Bank raised rates last week and indicated more may follow if inflation picks up.
Markets also imply about a 76% chance that the Bank of Japan will raise its policy rate by 25 basis points to 1.25% at Friday's meeting. The BOJ is also expected to signal the possibility of further tightening as it seeks to support the yen following intervention that helped pull the currency away from a 40-year low.
"The Fed is more impatient than it was, and central banks are more impatient than they were, the ECB included. They're not just going to let time do its work. They want to get ahead of it," Chaar said.
In currency markets, the dollar rose against major peers including the euro, yen and Swiss franc. It rose 0.53% to 154.40 against the yen and was up 0.1% at 0.817 against the Swiss franc.
The euro was 0.43% lower against the dollar at $1.15475 .
Gold prices fell as the U.S. dollar rose. Spot gold fell 1.19% to $4,295.73 an ounce. - Reuters
