Futures Slide As Brent Tops $100, 10Y Yields Rise Above 4.81% Ahead Of Expanded Treasury Buyback

US equity futures are lower as oil continues its ascent, pushing Brent above $100 for the first time since July 24 and pushing 10Y yields to 4.81%. As of 8:15am, S&P futures are trading at session lows, down 0.5% and after erasing early gains, echoing a rally in Asian technology shares that lost momentum as the session progressed. Nasdaq futures are down 0.6% as Mag 7s trade mixed premarket: META +5% after saying early Muse AI usage has “blown way past our projections” with users engaging 10x more than its test cohorts, while AMZN -0.4%. The Treasury Department is expected to announce on Wednesday the size of the next day’s operation to repurchase outstanding 10-year to 20-year securities. Treasury 10-year yields trade above 4.81%, rising by 3bps. USD extended losses, trading near a 7 month low.The yen extends gains to trade near 153.30 per dollar, outperforming its G-10 peers. Treasury Secretary Scott Bessent challenged traders to test his resolve on boosting the Japanese currency. Hedge funds are betting the yen will strengthen beyond 150 by year-end. Commodities were mostly higher with WTI surging above $95 and Brent topping $100 (with Shanghai oil trading almost $10 higher) for the first time since July 24 after the US struck Iranian tankers near the Kharg Island export hub and in the Gulf of Oman. Tehran responded by firing missiles at Jordan and warning ships in the Persian Gulf. Precious metals and ags are all higher. US economic data slate includes weekly ADP employment change at 8:15am. Fed speaker slate is blank during Sept. 5-17 external communications blackout period around the Sept. 15-16 FOMC meeting

In premarket trading, Mag 7 stocks: Meta rises 5% with analysts positive on the Facebook parent after it debuted Muse, an AI assistant;
Microsoft +0.04%, Apple -0.2%, Amazon -1.6%, Nvidia -0.4%, Alphabet -1.8%, Tesla -0.9%

Braze (BRZE) slides 11% after the software company’s adjusted EPS forecast for the third quarter fell short of the average analyst estimate.
Casey’s (CASY) drops 11% after the convenience-store operator reported a miss on first-quarter gross margin, as well as fuel gross profit. The stock had surged 33% this year as of Tuesday’s close.
Chime (CHYM) jumps 9% after striking a deal to buy Stride Bank for $590 million in cash, snapping up its longtime partner as the fintech streamlines its operations.
Evommune (EVMN) falls 8% after the drug developer said a mid-stage trial of its experimental therapy to treat atopic dermatitis failed to meet primary and secondary endpoints in any of the doses studied.
Mission Produce (AVO) gains 4% after the avocado producer reported adjusted earnings per share for the third quarter that beat the average analyst estimate.
ServiceTitan (TTAN) is down 17% after the software company’s third-quarter revenue forecast fell short of expectations. Bloomberg Intelligence highlights that the company slowed scaling of its agentic AI product Max.
Tyra Biosciences (TYRA) tumbles 21% after announcing initial results from a Phase 2 study.

In other corporate news, Uber is said to be looking to raise around €4 billion ($4.7 billion) from its debut five-part euro bond. Amazon is selling its debut sterling bonds in a four-part deal. BP’s North Sea operations have drawn interest from suitors including Adura and NEO Next+, as the oil major works to exit the basin. Top lithium supplier Albemarle reached a preliminary wage agreement with union leaders in Chile on the final day of mediated talks before a strike was due to begin.

Oil prices extended gains for a fourth day, pushing Brent above $100 for the first time since July 24 with WTI around $95 - maintaining energy’s position as the key macro driver - after US forces destroyed five Iranian tankers carrying crude in response to two attempts to hit a US Navy warship with ballistic missiles. Tehran responded by firing missiles at Jordan and warning ships in the Persian Gulf. Treasuries fell across the curve, with the shorter end bearing the brunt. The two-year yield climbed three basis point to hit 4.42%, the highest since 2024. Europe saw a steeper selloff.

Brent reaching a threshold last crossed in July comes days ahead of the latest US inflation print. The data is widely seen as decisive in tipping the scales for or against a Federal Reserve interest-rate hike next week, with money markets pricing around a 60% chance of a move.

“The risks to equity markets continue to pile up as the discount rate which they face gets higher and higher and higher,” said Ashley Lester, chief research officer at MSCI. “The question is to what extent can continued AI earnings growth continue to push equity markets onward.”

Traders are now waiting for an announcement on the size of Thursday’s buyback operation for outstanding 10-year and 20-year Treasuries, part of Treasury Secretary Scott Bessent’s efforts to restrain yields.

Bessent stole headlines overnight, offering views on markets, bonds, GDP and the Midterms. He challenged traders to test his resolve on boosting Japan’s currency, saying “I am the house now,” and warned that the US faces dire consequences if it loses out in the AI race with China.

Bessent is also set to reveal today how far he’s initially willing to go to restrain US bond yields via an expanded buyback program, with wide-ranging estimates of as much as $10 billion per operation. Bloomberg strategists said this test to support the market is likely to fail, as years of budget deficits have helped drive the long-term natural rate of interest in the US to the highest in two decades.

Barclays strategists raised their S&P 500 target for year-end 2026 to 7,950 from 7,800, citing continued earnings strength. RBC strategists said the risk of a near-term 5% to 10% pullback in the S&P 500 are rising, citing weak seasonality, US midterms volatility and the Iran war.

Conferences season is full steam ahead: conferences include Goldman Sachs Communacopia & Technology Conference (San Francisco), Jefferies Industrials Conference (New York), Citi Global TMT Conference (New York), Citi GEMS Conference (New York), Barclays Global Consumer Staples Conference (Boston), Goldman Sachs European MedTech & Healthcare Services Conference (London), Bernstein’s Annual Pan-European Strategic Decisions Conference (London), Morgan Stanley Industrial CEOs Unplugged (London), UBS Global Materials Conference 2026 (New York), Wells Fargo 21st Annual Healthcare Conference (Boston), Kepler Cheuvreux Autumn Conference (Paris).

In tech, Apple is holding its most anticipated event in years: New CEO John Ternus is set to debut a roughly $2,000 foldable iPhone, with larger-storage configurations going up to roughly $3,000. The shares have surged over the summer, while history shows that they’ve fallen on five of the past eight days when new versions of the iPhone were unveiled.

In AI, Google is planning its biggest investment in Europe, an AI infrastructure build out worth at least €13 billion in Finland. And US security agencies accused China’s top AI companies including DeepSeek and Alibaba of using distillation techniques to access and draw information from American AI models “at an industrial scale.”

In politics, Chris Pappas won the Democratic primary for a New Hampshire Senate seat, setting up a November showdown with former Republican Senator John Sununu.

Elsewhere, the US escalated its trade war with Canada, moving to block imports of some products, while slapping new tariffs on others and is seeking to bar Canadian companies from selling to government contractors. The import bans for some Canadian dairy products and alcohol will take effect in three weeks, a senior administration official told reporters.

In Europe, sectors sensitive to the economy dragged the Stoxx 600 down 1.5% in a move led by industrials which are sensitive to energy costs. Here are the biggest movers Wednesday:

Fortum shares gained as much as 11%, the most since Feb. 2022, after the Finnish energy company said it has signed a 22-year power-purchase agreement with Google covering up to 50% of the capacity at its Loviisa nuclear plant from 2028
Victrex shares jumped as much as 17% to the highest since March 2025 after the thermoplastic specialist said annual underlying pretax profit will top guidance following a strong performance in the final quarter of the financial year
Interparfums shares rise as much as 4% after the perfume and cosmetic product manufacturer reported earnings comfortably ahead of expectations in the first half, bolstered by better margins
Kinnevik shares rose as much as 8.2%, briefly hitting their highest level since February, after being upgraded at SEB Equities
Gym Group shares rose as much as 6.7%, the most in a year, after its first half earnings beat expectations, according to Panmure Liberum
Energean gained as much as 6.6%, the most in five months, after the oil and gas producer reported first half production and revenue that beat expectations
Inditex shares fell as much as 4.9%, the most in six months, after the Zara owner’s first-half earnings missed sell-side expectations due to rising operational costs
AUTO1 Group shares fell as much as 5% after the online used-car dealer announced CFO Christian Wallentin is stepping down for family reasons
Webuild dropped as much as 9.2% as the company announced that Italy’s market regulator Consob has ordered the restart of the review period for the firm’s voluntary tender offer on all Trevi-Finanziaria Industriale’s ordinary shares

Asian stocks rose as sustained enthusiasm for artificial intelligence lifted chipmakers, with investors looking past escalating hostilities in the Middle East. The MSCI Asia Pacific Index advanced as much as 0.7% before trimming gains. South Korea’s Kospi rose 1.4%, as SK Hynix and Samsung Electronics tracked their US peers higher. Benchmarks in Japan and Taiwan weakened throughout the session as higher oil prices fueled concerns over inflation. Interest in technology shares persisted even as geopolitical tensions intensified and oil prices extended their climb. Brent crude hit $100 a barrel as attacks between the US and Iran and a recovery in Chinese oil buying propel the global crude benchmark higher. Meanwhile, Citi sees Indonesia equities rising about 9% from current levels by year-end but maintains a cautious stance on the world’s worst performer this year. The Jakarta Composite Index has gained about 25% from a June low, entering a technical bull market.

“There’s no evidence the capex cycle’s slowing,” Christopher Wood, global head of equity strategy at Jefferies, said on Bloomberg TV. “I would still rather own the picks-and-shovels trade than the people spending the money.”

In FX, the Bloomberg Dollar Spot Index is down 0.1%, nearing its lowest level in nearly seven months as the yen rallied, with traders looking ahead to the US Treasury’s buyback announcement and inflation data later this week. The yen advanced against all its Group-of-10 peers after US Treasury Secretary Scott Bessent challenged traders selling the Japanese currency. USD/JPY fell 0.3% to 153.47 after touching 152.89 on Tuesday, the lowest since February. When the US intervenes with the yen, “I have pretty good insight” into what the Bank of Japan and Japanese policymakers are going to do, Bessent said. “And you can bet against me if you want”

In rates, treasuries hold modest losses led by front-end tenors as oil prices extend their climb, spurring traders to price in increased chance of a Fed rate hike at next week’s policy meeting. US yields are up 1-2bps across the curve ahead of the US buyback announcement and 10-year supply. Supply also weighed as a 10-year note reopening is set to draw the highest yield since 2007 and new corporate bond sales are seen topping Tuesday’s almost $40 billion haul. Long-end tenors have support from uncertainty about the size of Thursday’s expanded buyback operation, to be announced at 11 a.m. 2- to 7-year yields are 2bp-3bp higher on the day with long-end tenors outperforming, flattening 2s10s curve by about 1bp, 5s30s by about 2bp; 10-year is around 4.805% with bunds and gilts in the sector lagging by an additional 2.5bp. Treasury auction cycle continues with $39 billion 10-year reopening at 1 p.m. New York time; Tuesday’s $58 billion 3-year new-issue drew good demand at highest yield since 202. WI 10-year yield around 4.81% is ~13bp cheaper than last month’s auction result. IG dollar issuance slate includes a couple of names so far. Eighteen offerings were priced on Tuesday, with issuers paying about 2bp in new issue concessions on deals that were 3.9 times covered. Stand-downs and flurry of mandates announced Tuesday point to a potentially busier Wednesday session

In commodities, Brent crude topped $100 a barrel for the first time since July 24 as the US war on Iran flared and Chinese buying recovered; WTI crude is up 2.3% after topped $95 for the first time since June. European natural gas prices hit a three-year high. The weaker dollar helped push gold higher by 1%. Bitcoin adds 1.3%.

US economic data slate includes weekly ADP employment change at 8:15am. Fed speaker slate is blank during Sept. 5-17 external communications blackout period around the Sept. 15-16 FOMC meeting

Market Snapshot

Top Overnight News

The US military struck five Iranian tankers on Tuesday, sinking one, after Iran fired ballistic missiles at a US Navy warship, in a fresh escalation of fighting in the Middle East. The attacks prompted a significant retaliation from Iran, which launched a missile barrage toward regional US ally Jordan, saying it was targeting US military assets (18 of 20 missiles were intercepted, and two fell into unpopulated areas, with no casualties reported). CNN
Commercial vessel traffic through the Strait of Hormuz is poised to remain at about 5% of prewar levels after the resurgence of US-Iran hostilities. Crossings will stay severely suppressed through late 2026 even if a lasting ceasefire takes hold. BBG
Brent oil topped $100 a barrel for the first time since July, as attacks between the US and Iran and a recovery in Chinese oil buying propel the global crude benchmark higher: RTRS
Treasury Secretary Scott Bessent challenged traders to test his resolve on boosting Japan’s currency, “I am the house now, so when we intervene with the Japanese yen, I have pretty good insight into what the Japanese, what the Bank of Japan is going to do, what Japanese policymakers are going to do,” Bessent said at a Southern Methodist University event in Texas on Tuesday. “And you can bet against me if you want”. BBG
Hedge funds are betting the yen will strengthen beyond 150 per dollar by year-end, with some longer-dated options trades targeting a move to 140: BBG
Treasury Secretary Scott Bessent is set to reveal how far he’s initially willing to go restrain US bond yields via an expanded buyback program that has Wall Street dealers on edge. The Treasury Department is expected to announce on Wednesday the size of the next day’s operation to repurchase outstanding 10-year to 20-year securities; past precedent indicates it would be at 11 a.m. in Washington. It will be the first such release since the Treasury shocked market participants Aug. 19 by saying it would “at least double” the $2 billion sizes it had penciled in just two weeks before. BBG
Apple is holding its most anticipated event in years today: New CEO John Ternus is set to debut a roughly $2,000 foldable iPhone, with larger-storage configurations going up to roughly $3,000. The shares have surged over the summer, while history shows that they’ve fallen on five of the past eight days when new versions of the iPhone were unveiled. BBG
Meta on Tuesday formally launched Muse, a personal AI agent “that understands your goals and works 24/7 to get things done for you”. WSJ
China’s consumer and factory-gate prices edged higher in August, fueled by energy-market jitters tied to renewed tensions in the Middle East. The producer-price index climbed 3.8% in August from a year earlier, accelerating from July’s 3.5% increase. The figure topped the median 3.7% increase projected by economists. Core CPI (+1% vs. the Street +0.9% and vs. +0.9% in Jul) while headline CPI was inline (+0.8%, up from +0.5% in Jul). WSJ
US agencies accused DeepSeek, Alibaba and other Chinese AI firms of systematically extracting proprietary knowledge from American firms. BBG
The US escalated its trade war with Canada following Ottawa’s tariff retaliation, moving to block imports of some products while slapping new tariffs on others, as well as seeking to bar Canadian companies from selling to government contractors. Donald Trump said he would also seek to bar Canadian companies from selling to government contractors. CNN
India is ramping up scrutiny of Wall Street traders with the nation’s securities regulator turning more aggressive in targeting even prominent foreign players like JPMorgan Chase & Co. in its $5 trillion stock market: BBG
LIV Golf filed for bankruptcy protection Tuesday, a dramatic fall for the Saudi-backed league that had big ambitions to challenge the supremacy of the PGA Tour: BBG

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mixed as the region attempted to shrug off the weak lead from Wall Street, where all major indices declined on return from the long weekend amid rising oil prices and geopolitical escalation. ASX 200 was subdued as gains in energy, resources, mining and materials were offset by weakness in healthcare, financials and the consumer-related sectors. Nikkei 225 swung between gains and losses with few fresh catalysts and as further reports continued to point to a BoJ rate hike next week, while Nintendo was among the laggards after its Legend of Zelda 40th Anniversary Direct announcements underwhelmed. KOSPI resumed its regional outperformance and climbed above the 7,000 level with Samsung underpinned following several recent announcements and with SK Hynix unfazed by reports that Kioxia's CEO dismissed prospects of closer ties with the South Korean chipmaker. Hang Seng and Shanghai Comp were mixed, with price action contained after the PBoC continued to refrain from open market operations and as participants digested the Chinese inflation data in which CPI matched estimates, but PPI was firmer-than-expected and showed an acceleration in factory gate prices.

Top Asian News

US Treasury Secretary Bessent said he has good insight when they intervene on the yen and dared people to bet against him, while Bessent commented that he has information and good insight into what the BoJ and policymakers will do.
Japan cabinet reshuffle is set for September 17th, according to Asahi.

European bourses (STOXX 600 -0.9%) are entirely in the red, given the renewed US-Iran tensions overnight. US CENTCOM announced that it destroyed 5 Iranian oil tankers in response to the IRGC targeting a US Navy warship. In retaliation, the IRGC struck back, firing ballistic missiles at a base in Jordan and attacking 10 ships. Energy prices have climbed in turn, with Brent Nov'26 briefly extending above the USD 100/bbl mark. Sectors highlight the negative bias. Utilities, Telecoms and Energy are the only sectors in the green. The clear underperformer is Retail, given losses in Inditex amid mixed H1 earnings, while Consumer Products & Services and Banks round out the sector laggards.

Top European News

French PM Lecornu is considering plans to reduce the exceptional contribution imposed on very large companies, TF1 reported

G10s are mostly firmer against the USD. The JPY mildly outperforms vs peers, continuing to build on its recent strength. The Kiwi is the slight laggard this morning. Westpac remains short NZD/USD, targeting 0.5700 or lower vs a current price of 0.5843.
DXY is incrementally lower this morning despite higher oil prices, and currently holding within a 98.61 to 98.82 range. Focus has been on geopolitical updates, after another bout of US-Iran fighting has led to a leg higher in energy prices, which in turn has lifted domestic yields. The US 2yr (4.4%) now holds near recent highs. On the trade front, the Loonie is relatively unmoved to the US announcing an import ban on alcohol and other goods from Canada in response to the latter's tariff retaliation.
The JPY modestly outperforms this morning, with USD/JPY holding within a 152.93 to 154.01 range. A continued bout of pressure will see the pair trade well within levels seen in mid-February, however, it will likely find some support at the 152.00 level, which was the low on 27 Jan 2026. A breach beyond that level would likely require a dovish US CPI report on Friday, a hold at the Fed next week and a hawkish BoJ policy announcement thereafter.
The outperformance this morning can be attributed to daring commentary from US Treasury Sec Bessent. He stated that “I am the house now”, and has good insight into what Japanese policymakers and the BoJ will do. He provided a final warning that he has asymmetric information. The strong commentary from Bessent, along with hawkish BoJ speak over the past couple of weeks will keep JPY vigilantes on the sidelines, at least for now. However, once we get past the string of policy decisions next week – markets may begin to shift their attention back to energy dynamics, which JPY is particularly sensitive to.

Fixed Income

Unsurprisingly, given the late-Tuesday action, Gilts gapped lower at the open. Down by 19 ticks and then another 19 to a 85.62 low, but clear of Tuesday’s 85.56 base. Since, in a morning of somewhat less macro newsflow than the last few days, the benchmark has held in proximity to that low, unable to find and respite as peers did overnight; though, they too have faded in recent trade.
Bunds spent the APAC session modestly in the red, but in a very thin range, as the complex awaited a major update on the geopolitical front. Since, in the European morning as energy climbs and after Brent surpassed the USD 100/bbl handle, further pressure has emerged taking Bunds to a 121.64 low. Concerning for Europe, and lifting short-end yields in particular, is the ongoing climb of TTF, to over EUR 79/MWh today, a high for the October contract. An ascent that underscores the expected ECB hike on Thursday.
USTs were flat/firmer in APAC trade, holding around 107-10 for the most part. Since, given the above, some modest pressure has emerged to take the benchmark just into the red by a couple of ticks and prints a low at 107-07+. Today is focused firmly on the Treasury buyback announcement, the first after the move to at least double the long-end operations from the current USD 2bln maximum. Given the “at least” language, and the commentary from Secretary Bessent that operations could be above the implied USD 4bln level if required, we are attentive to the announced size, any scheduling update and/or accompanying commentary the Treasury may choose to provide.
Germany sells EUR 4.201bln vs exp. 5.5bln 3.00% 2036 Bund: b/c 1.47x (prev. 1.15x), average yield 3.39% (prev. 3.26%), retention 23.62% (prev. 37.2%).
Amazon (AMZN) begins the sale of its four-part Sterling bond. Guidance: 3-year +70bps to Gilts, 6-year +90bps to Gilts, 12-year +105bps to Gilts, 19-year +110bps to Gilts.

Commodities

In geopolitics, US forces destroyed five Iranian crude oil tankers tied to the IRGC in response to repeated attempted missile attacks on US Navy warships, with US Secretary of State Rubio warning that Iran will lose tankers each time it targets American vessels. Iran retaliated with further missile strikes, including at least 20 missiles targeting bases in Jordan, although Jordan said 18 were intercepted and no casualties were reported, while the IRGC claimed attacks on US warships and commercial vessels and threatened further retaliation against US interests. Meanwhile, Iran said it remains committed to its MoU with Washington despite reportedly demanding new conditions for negotiations, while explosions were also reported in Saudi Arabia’s Jazan region and oil fields.
Crude futures are on a firmer footing, with Brent Nov extending above USD 100/bbl this morning for the first time since late July. Attention has been on some UKMTO updates, which have appeared to outline some of the activity seen on Wednesday. Both benchmarks are towards the upper end of intraday bands, WTI Oct in a USD 93.76-95.19/bbl (vs yesterday’s 90.87-94.73/bbl range) and Brent Nov within USD 98.80-100.68/bbl (vs yesterday’s 96.78-99.46/bbl range). Dutch TTF firms by almost 4% intraday and resides close to EUR 79/MWh after briefly topping the level this morning from a base under EUR 77/MWh, with winter heating demand also taking focus.
Metals are mixed. Precious metals cheer a weaker Dollar irrespective of the firmer oil prices, with a weaker Buck allowing geopolitical risk premium to be baked in. Spot gold found support at its 100 DMA (USD 4,343/oz), with the bullion trading in a current USD 4,341-4,413/oz range, with yesterday’s peak at USD 4,443/oz. Spot silver found support near yesterday’s low around USD 65.50/oz, and resides not far from its 100 DMA (USD 67.15/oz) in a current USD 65.52-67.01/oz range.
Base metals are mixed, with copper prices subdued following recent record highs on the LME, and with the mood cautious against the backdrop of higher energy prices and its impact on inflation and growth. 3M LME copper trades in a USD 14,596.50-14,725.03/t range.
Iraq is reportedly seeking a significant output quota increase during OPEC+ audits, wanting to target 6mln bbls/day, Bloomberg reported.
Turkish Energy Minister said that they are starting an oil exploration in the Western Black Sea in the coming days.

Trade/Tariffs

US President Trump said he is directing the General Services Administration, working with the USTR, to take all necessary steps to remove Canadian-origin products from GSA’s Multiple Award Schedules unless Canada restores full and fair reciprocity for American farmers and companies.
White House posts proclamations regarding modifying scope of Canadian products subject to additional duties and excluding certain products from importation to the US, with respect to motor vehicles, dairy and alcoholic beverages.
US senior administration official said President Trump approved a series of proclamations on Canadian trade measures, with the ban on dairy, most alcohol and motorcycle imports from Canada under Section 338, while the official stated the restrictions are to take effect in about 3 weeks and that Trump's stance on the January 1st, 2027 auto tariff hike remains in effect.
Canada's Minister Responsible for US Trade LeBlanc said they are assessing the latest tariffs from the US, while he is in contact with USTR Greer and will work in good faith when the US is ready to engage.
US Commerce Secretary Lutnick will meet with Mexican President Sheinbaum and Economic Minister Ebrard and will discuss US tariffs on Mexican autos and metals, according to POLITICO.

Geopolitics: Iran

US Central Command confirmed that forces destroyed five Iranian crude oil carriers on Tuesday after the IRGC targeted a US Navy warship with ballistic missiles twice over the past two days.
US Secretary of State Rubio said every time Iran tries to hit US Navy ships, they will lose tankers.
Iran launched missiles at targets in response to US strikes on tankers, while it launched at least 20 missiles at bases in Jordan, with the Al-Salti and Prince Hassan bases targeted, according to SNN. However, Jordan said air defences intercepted and destroyed 18 of 20 Iranian missiles, and two fell away from population centres, while it stated that no casualties were reported after the Iranian missile strike. Furthermore, it was later reported that Jordan intercepted additional missiles in the east.
IRGC claimed missile strikes on US combat destroyers, while it announced that it attacked two US vessels, eight oil vessels and ten violating ships that intended to cross the prohibited and unsafe area of the Strait of Hormuz.
Iran's MP said there is a "possibility of re-examining the plan to withdraw from the NPT in the parliament", ILNA reported.

Geopolitics: Ukraine

Russia is anticipated to prolong the Ukraine war into 2027 as peace talks stall, with President Putin believed to be waiting for a stronger military and political position before serious negotiations. Furthermore, Western officials warned that Moscow will intensify winter attacks on Ukraine's energy infrastructure whilst escalating cyber attacks, sabotage and influence operations across Europe.
Ukraine Drone Forces Commander said that Ukraine hit military vessels at Russia’s Novorossiysk naval base.
Russian strikes hit port infrastructure in Mykolaiv, according to Ukrainian officials.
CPC oil terminal on the Black Sea was reportedly attacked by drones overnight.

Geopolitics: Other

Top US diplomat in Taiwan said, aside from the human toll, any conflict across the Taiwan Strait would have a bigger impact on the global economy than the Second World War.

US Event Calendar

7:00 am: Sep 4 MBA Mortgage Applications, prior 0.8%

DB's Jim Reid concludes the overnight wrap

Today is the day when I work out whether the thing that's truly been missing from my life over the last few years, or even decades, is a foldable phone. I usually go into an Apple launch event day saying that this time my vast collection of Apple products is finally now stable and mature. That said, I usually come out the other side with 10 timers set so as not to miss the eventual first order point for the new products.

As we await "iFold”, markets seem to be treading water this week as increases in energy prices dampen risk appetite, as Brent crude is nearing the $100 level last seen six weeks ago. While Brent did give some of its initial gains yesterday to settle +0.95% at $97.92/bbl, news late in the US session of new strikes in the Gulf have left it another +1.45% higher at $99.34/bbl this morning after touching $99.67/bbl earlier in the session. And with inflationary pressures still mounting, that kept the pressure on other asset classes too. Indeed, the S&P 500 (-0.58%) posted a fresh decline as US markets returned after Labor Day, whilst the 5yr Treasury yield (+1.8bps) closed at a 19-month high of 4.56%.

The initial catalyst for the fresh increase in oil came just as we were going to press yesterday, as Saudi Arabia halted operations at multiple energy sites after they were attacked. The Houthis claimed responsibility shortly after. And while oil prices fell back late in the European session, they then spiked again amid news of explosions near Kharg Island, which houses Iran’s main oil export facilities. US Central Command announced later that US forces destroyed five Iranian tankers in response to attempts to hit a US Navy warship with ballistic missiles. In response to the strikes, Iranian state TV cited an IRGC warning to tankers in the vicinity of Bahraini and Kuwaiti piers to evacuate their vessels “as they will be targeted”. Iran also launched missiles towards an air base in Jordan overnight.
So all that has left investors growing more concerned about further disruption and pricing a longer period of high energy prices. In fact, the 6-month Brent future (+1.52%) closed at its highest level since mid-June, at $84.78/bbl. It is another +1.45% higher this morning. So there is growing scepticism that oil prices will meaningfully revert over the coming months.

In the meantime, the relentless rise in European natural gas prices also continued yesterday. For instance, the front-end future rose +3.46% to €75.80/MWh, its highest since January 2023, so the inflationary pressures were clear in multiple directions. The latest move comes as Europe is seeking to fill up its storage, but it’s still only 67% full, which is lower than it’s normally been at this time of year. Indeed, storage was 79% full in 2025, and was 93% full in 2024, so that’s added to concerns ahead of the winter heating season. The refilling shortfall has been concentrated in some of the northern continental countries, including Germany (55% full) and Netherlands (50% full). Given all that, investors were pricing in higher inflation too, with the 1yr Euro inflation swap (+2.9bps) moving back up to 3.40%, its highest since May. The ECB's comments on the latest developments at their policy meeting tomorrow will be fascinating.
That backdrop meant it was a more challenging day for equities, with fresh losses on both sides of the Atlantic. In the US, the S&P 500 (-0.58%) fell back as part of a broad-based decline, with more than 70% of the index lower on the day. The Nasdaq (-0.32%) and the Mag-7 (-0.35%) saw slightly smaller declines thanks to a recovery in chipmakers, which also sent the Philly semiconductor index (+1.30%) higher for a 4th consecutive session. Meanwhile in Europe, the STOXX 600 (-0.05%) slipped back again slightly, with the continent’s indices generally seeing little movement. So the FTSE 100 (-0.10%) and FTSEMIB (-0.10%) posted modest declines, whilst the CAC 40 (+0.14%) eked out a gain. Stoxx futures are around half a percent lower this morning.

The latest inflation pressures also kept up the pressure on US Treasuries, with yields rising across the curve, particularly at the front-end. So the 2yr yield was up +2.8bps to a one-week high of 4.39%, whilst the 5yr yield (+1.8bps) just about hit its highest since January 2025, at 4.56%. By contrast, the 10yr yield (+0.7bps) only saw a very modest increase to 4.79%, leaving it just shy of its 4.80% peak a week earlier, which had been the highest since October 2023. Overnight yields are fairly steady across the curve.

Those moves come ahead of the US Treasury’s upsized long-end buyback operation tomorrow, the size of which is expected to be announced today. Yesterday Bessent described the increased operations which were announced last month as aiming to quell a “fever” that was building in the bond market.

Over in Europe, the inflation pressures were also clear. But even as inflation breakevens moved higher, a reduction in real rates ultimately left sovereign bond yields lower on the day. So that meant that yields on 10yr bunds (-2.0bps), OATs (-1.8bps) and BTPs (-2.2bps) all rallied. In Europe, UK gilts were the relative underperformer, with the 10yr yield only down -0.2bps. In part, that’s because gilts have generally been more sensitive to higher oil prices. But Bank of England Governor Bailey also warned that inflation risks remain “on the upside”.

In Asia, tech continues to support the KOSPI (+1.63%) which is again outperforming regional peers. Elsewhere, Japan's Nikkei (+0.07%), Hong Kong's Hang Seng (+0.02%), China's CSI 300 (+0.10%) and ASX (-0.17%) are all struggling to gain meaningful traction. S&P 500 futures are up +0.09% with Nasdaq 100 futures advancing +0.22%.

Early morning data showed that China's inflation pressures picked up in August, with both factory-gate and consumer price growth accelerating. The move was driven largely by higher energy costs linked to supply risks stemming from the Middle East conflict, even as underlying domestic demand remained subdued. Producer prices rose +3.8% year-on-year, above economists' expectations of +3.6% and up from +3.5% in July. Meanwhile, consumer prices increased +0.8% from a year earlier, in line with forecasts and accelerating from July's +0.5% gain.

Finally, there wasn’t much data of note yesterday. But we did get the NFIB’s small business optimism index from the US. That fell more than expected to 98.7 in August (vs. 99.3 expected), falling back again after rising over June and July. Otherwise, we also had the NY Fed’s latest Survey of Consumer Expectations. That showed growing pessimism about unemployment, as the mean probability of the US unemployment rate being higher in a year rose to 44.4%, the highest in the survey since April 2020 during the initial phase of the pandemic.

Looking at the day ahead now, data releases include French industrial production for July. Central bank speakers include Bundesbank President Nagel. And today is also when the US Treasury department will increase their buybacks for longer-dated Treasuries

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