Market Overview
Global financial markets were marked by persistently elevated US Treasury yields, with the benchmark 10-year yield remained elevated, closing just under 5% after climbing above that threshold earlier in the week, as expectations of further hawkish Federal Reserve rate hikes persisted. This pressure from the bond market was somewhat counterbalanced by a notable decline in crude oil prices, which tumbled below $100 a barrel as diplomatic progress between the US and Iran and Saudi Arabia’s ability to restore pipeline flows eased supply disruption fears. US equity markets closed mixed on Friday, with the S&P 500 and Nasdaq Composite posting modest gains, while the Dow Jones Industrial Average finished down. As investors enter the APAC session, attention will turn to upcoming Australian jobs data and Reserve Bank of Australia commentary, crucial for the domestic interest rate outlook.
Markets
US equities saw a mixed close to the week. The S&P 500 (^GSPC) edged up 0.17% to 7,650.50, and the Nasdaq Composite (^IXIC) advanced 0.39% to 26,522.54. In contrast, the Dow Jones Industrial Average (^DJI) declined -0.18% to 51,682.64. For the week, the Dow posted its third straight losing week, down -1.69%, while the S&P 500 ended slightly lower, down -0.08%, and the Nasdaq Composite saw a 0.72% gain.
The US 10-year Treasury yield (^TNX) remained elevated, closing at 4.998, up 5.10 basis points, reflecting continued hawkish Federal Reserve expectations. The Australian 10-year yield stood at 5.26%.
In commodities, Brent Crude (BZ=F) traded at $98.77, down -5.77% on the day and -5.58% on the week, falling below $100 a barrel. WTI Crude (CL=F) also tumbled significantly, trading at $95.47, down -6.32% on the day and -4.58% for the week. Gold posted a modest gain, with Gold (GC=F) closing at $4,415.90, up 0.37%. Iron ore also edged higher to stand at $US97.20 a tonne, up 0.9%.
The Australian Dollar (AUDUSD=X) strengthened against the US Dollar, closing up 0.47% at 0.7121. In cryptocurrencies, Bitcoin (BTC-USD) extended its rally, climbing 6.30% to 81,217.
ASX 200 futures are pointing to a lower open in Australia, down 52 points or 0.6% to 8716.
What Drove Markets
Elevated bond yields were significantly influenced by the Federal Reserve’s recent quarter-percentage-point rate hike, its first in three years, which raised the federal funds rate to 3.75%-4.00%, with the FOMC unanimously voting for the increase. The central bank’s updated Summary of Economic Projections and Fed Chair Kevin Warsh’s post-decision press conference were described as “decidedly hawkish,” fueling expectations for US interest rates to climb above 5%. Most FOMC members saw the need for another hike. Economists at Bank of America reaffirmed their expectation that the Federal Reserve will lift rates in October and December, with strategists separately advising investors to prepare for rates above 5%. This outlook drove the US 10-year Treasury yield to levels not seen since July 2007, an over 19-year high earlier in the week. Edward Jones’ senior global strategist Angelo Kourkafas noted that while the latest Fed move is not likely “one-and-done,” it also doesn’t look like the start of an aggressive rate-hiking cycle. Separately, Certuity CIO Scott Welch opined that the rate hike cycle is just beginning and could dampen equity performance over the coming months, forecasting that the Fed will hike at least one more time in 2026 and probably another time or two in 2027.
Crude oil prices tumbled for a third consecutive session as fears of supply disruptions from the Middle East eased. Signs of diplomatic progress between the US and Iran contributed to the softer sentiment, including President Trump’s remarks about a potential “end of the war” and visas granted for Iranian officials to attend the UN General Assembly. Chinese Foreign Minister Wang Yi called on Washington and Tehran to exercise restraint and reopen the Strait of Hormuz. President Trump is also set to meet with Gulf leaders on the sidelines of the UN General Assembly next week. Hopes for Saudi Arabia to quickly restore flows through the damaged East-West Pipeline and Riyadh’s efforts to offer alternative crude cargoes to Asian refiners further helped mitigate supply concerns. The East-West Pipeline had been damaged amid an escalating conflict between Saudi Arabia and Iran-backed Houthis in Yemen, threatening up to 4% of global oil supply. Satellite imagery suggested Saudi Arabia moved 2.8 million bpd through the Strait of Hormuz over the past six days, compared with just 700,000 bpd in August, and Aramco reportedly expects to restore half of the pipeline’s daily flows. In this context, Mark Luschini, chief investment strategist at Janney Montgomery Scott, suggested that a form of détente with Iran leading to a sustained decline in oil prices could be the near-term impetus for investors to bid stocks to new highs, as it would mitigate energy cost risks and geopolitical premiums.
Separately, Warren Buffett announced he is stepping down as chairman of Berkshire Hathaway, a company he took control of six decades ago and turned into a sprawling conglomerate that became the first U.S. company outside the technology sector to top $1 trillion in market capitalization in August 2024. He will remain a director on the board and has been named chairman emeritus, with his chair position to be filled by Howard Buffett. The week also saw a furore over AI safety, with Anthropic researcher Jacob Coxon’s resignation and claims about AI’s potential dangers, and OpenAI disclosing six reports highlighting “unexpected or concerning” behavior from its AI models. These concerns were echoed by other AI industry tycoons, including OpenAI chief executive Sam Altman, xAI founder Elon Musk, and Demis Hassabis, co-founder and chair of Alphabet’s Google DeepMind. President Trump, however, pushed back against these concerns, calling them a “hoax.” California Governor Gavin Newsom has also issued an executive order to convene a group of experts to draw up a guide for the US state to reinforce and strengthen its AI safety and security laws, with proposals under consideration including requiring companies to develop a ‘kill switch’ for frontier models.
Ahead of the Reserve Bank of Australia’s September 29 policy meeting, the upcoming August jobs data on Thursday will be a key release. Economists at NAB expect employment to rise by at least 20,000, with the unemployment rate potentially leaning towards 4.4% (from an unrounded 4.46% in July). Investors will also monitor speeches from RBA Assistant Governor Sarah Hunter (5 am AEST on Tuesday) and Governor Michele Bullock (1 pm AEST on Tuesday) next week for further policy guidance. Additionally, a raft of central bank officials in the US, UK, and EU are scheduled to speak next week following recent policy meetings.
Stocks to Watch
Several individual stocks saw notable movements. Coinbase (COIN) surged 11.66% to 194.25, helping to mitigate losses for financial sector funds. Among chipmakers, Broadcom (AVGO) was up 2.97% to 357.61, and Micron (MU) gained 3.92% to 1,015.80, offsetting some losses in the Nasdaq. Conversely, Goldman Sachs (GS) fell -1.00% to 942.00, leading financial stocks lower and poised for its largest weekly slide since April 2025. AI hyperscalers Meta (META) and Oracle (ORCL) were also lower, with Meta down -2.43% to 665.75 and Oracle down -1.98% to 147.61, amid debt issuance.