Oil prices held at elevated levels as fighting continued in the Middle East, while rising bond yields weakened risk appetite in global markets. Investors focused on energy costs and the inflation outlook ahead of interest-rate decisions by leading central banks.
A new attack by Yemen's Houthis targeting Saudi Arabia heightened concerns over oil supplies. November Brent crude futures rose 1.7% to trade at $107.40 a barrel.
Rising energy prices strengthened concerns that inflation could prove persistent. The U.S. 10-year Treasury yield climbed to 5.03%, its highest level since July 2007.
Dollar strengthens ahead of Fed decision
Expectations that the U.S. Federal Reserve will tighten monetary policy to combat inflation increased selling pressure in the bond market. The two-day interest-rate meeting began, and market pricing indicated that an interest-rate hike was widely expected.
The Fed last raised interest rates in July 2023. Amid expectations of a rate hike, the dollar index rose 0.1% to 99.6. Despite the increases in the dollar, oil prices and bond yields, gold also gained 0.1% to reach $4,305 an ounce.
U.S. President Donald Trump said oil prices would fall if the conflicts with Iran ended. Trump also described assessments that artificial intelligence technology could spiral out of control as a “sick conspiracy.”
Artificial intelligence stocks decline
Calls to slow technology development work in the field of artificial intelligence came to the forefront of market discussions, alongside the impact of competition between the United States and China. Microsoft published a draft set of rules aimed at limiting the behavior of future models as debates over AI safety continued.
The New York Stock Exchange ended the first trading day of the week lower. Nvidia shares fell 3.4%, AMD shares declined 4.4%, Broadcom shares dropped 4.8%, Intel shares lost 5.6% and Marvell Technology shares fell 7.3%.
The Dow Jones index fell 0.29%, the S&P 500 declined 0.48% and the Nasdaq dropped 0.56%. U.S. stock-index futures also opened lower.
European and Asian markets also decline
European stock markets traded lower, with the exception of the United Kingdom. As higher oil prices weighed on risk appetite and the decline in technology stocks accelerated, ASML shares fell 6.1% and Infineon Technologies shares declined 7.7%.
Italy's FTSE MIB index fell 1.68%, France's CAC 40 declined 0.76% and Germany's DAX 40 lost 0.50%. In the United Kingdom, the FTSE 100 rose 0.44%. Germany's 10-year bond yield reached 3.55%, its highest level since 2009.
Isabel Schnabel, a member of the Executive Board of the European Central Bank, warned that rising energy prices were concerning. Falling copper prices weighed on mining stocks, while high oil prices supported energy shares.
Asian stock markets also traded lower. In China, retail sales rose 0.4% year on year in August but fell short of expectations; fixed-asset investment declined 7.2%. The unemployment rate was 5.3%, above expectations, while industrial production rose 5.2%.
Concerns about the Chinese economy persisted after the data, raising expectations that pressure on Beijing to provide fiscal support could increase. Japan's 10-year bond yield rose back above 3%.
Near the close, the Kospi fell 0.6%, the Hang Seng declined 0.2%, the Shanghai Composite dropped 0.1% and the Nikkei 225 fell 0.1%.
Borsa Istanbul falls 1.60%
Borsa Istanbul's BIST 100 index ended the previous day down 1.60% at 14,235.83 points. The October futures contract based on the BIST 30 index traded flat in the evening session of Borsa Istanbul's Futures and Options Market compared with the regular-session close.
The dollar/Turkish lira pair ended the previous day up 0.2% at 48.6170. The exchange rate traded at 48.6373 at the opening of the interbank market, just above the previous close.
Domestic markets will track the budget balance, while international markets will follow the United Kingdom's unemployment rate, the euro area's foreign trade balance and the New York Fed's Empire State Manufacturing Index. In technical assessments, 14,100 and 14,000 points stood out as support levels for the BIST 100, while 14,300 and 14,400 points were identified as resistance levels.
U.S. adds Russia's VTB Bank to sanctions list
The U.S. Treasury Department added Russia's VTB Bank, one of the country's leading financial institutions, to its sanctions list for allegedly helping evade sanctions as part of an “economic exclusion operation” targeting Iran.
