Jenson Holmes from Titan Wealth offers this week’s round-up of the global markets
BOND markets set the tone this week, on both sides of the Atlantic, as investors grappled with the important question: how high can borrowing costs go?
In the US, long-term government borrowing costs rose to their highest level since 2007, with the 30-year US Treasury yield climbing above 5.3% as investors weighed rising fiscal deficits, record corporate issuance linked to AI capital spending and continued uncertainty over the outlook for interest rates. Similar pressures were felt in the UK, where government bond yields also moved higher.
The US Treasury responded on Wednesday by doubling its buybacks of long-dated bonds from $2 billion to $4 billion at each purchase, signalling that it was keen to prevent borrowing costs from rising too quickly.
Markets initially welcomed the move, with bond yields falling, the dollar weakening by almost 1% and gold gaining over 3%. However, much of that bond optimism faded later in the week as the market questioned whether buybacks alone could offset the pressure from debt and deficits.
Within the energy market, oil rose in nine of the last 11 trading days, with Brent crude above $93 as the Strait of Hormuz standoff continued and Washington prepared a fresh round of financial measures against Iran. Refining capacity is stretched and diesel margins have moved above $100 per barrel, highlighting ongoing concerns about fuel supplies and the ability of refiners to keep pace with demand.
Closer to home, attention remained focused on July’s inflation figures, which showed UK inflation rising to 2.9%, a four-month high driven largely by energy costs. The Bank of England is widely expected to hold rates at 3.75% for the remainder of the year, although markets continue to price in some risk of a hike. There was better news elsewhere, with consumer confidence reaching a two-year high, industrial order books improving and early signs that AI adoption may be lifting UK productivity.
US equities finished the week modestly lower, though the more interesting story was beneath the surface, where leadership rotated away from semiconductors towards healthcare.
China’s July data weakened across the board, with soft retail sales and a continued property decline offset only by exports, roughly half of whose growth is now AI-related.
With growth running below target, the chances of more policy support later this year are rising, which may prove a catalyst for emerging-market and commodity-linked stocks.
After a difficult few months for gold, mainly due to rising bond yields and the threat of higher interest rates, the precious metal looks to have troughed and has risen by 12% so far this month and a very credible 34% over the past year.
Weeks like this one, when bonds, currencies and commodities all move at once, can be uncomfortable. However, periods of market volatility can also create opportunities for those willing to take a long-term view, particularly when high-quality businesses come under pressure alongside the broader mark.
