Oil at $100, Soaring Bond Yields, and ECB Hike Drive Market Volatility

Macro & Oil: Supply Shock and Yield Surge

• Middle East Tensions & Oil: Brent crude climbed above $100 per barrel following retaliatory strikes between the US and Iran, impacting traffic through the Strait of Hormuz. Houthi rebels also advanced toward the Bab al-Mandeb Strait. Saudi Arabia's crude output dropped to 6.24 million bpd, its lowest level since 1990.
• Bonds & Inflation: US PPI rose 5.4% YoY in August, driven by energy (+4.2%). The US 10-year Treasury yield surged to 4.92% (highest since late 2023). In Europe, French 10-year OAT yields hit 4.33%, their highest since 2008, pressuring European indices like the CAC 40 (-2%).
• Central Banks: The ECB raised its deposit rate by 25 bps to 2.50% to counter energy-led inflation. In the US, high PPI figures reinforce expectations of a Fed rate hike next week.

Indices & Tech: Pressure on Valuations

• European Luxury Slump: Sharply higher yields and persistent concerns over Chinese demand dragged down luxury stocks (Kering -4.97%, LVMH -3.59%, Hermès -2.32%), pushing European equities to three-month lows.
• Mixed US Tech Sector: Despite overall risk-off sentiment, Meta surged +6.55% following the launch and planned monetization of its 'Muse' AI agent. However, rising bond yields continue to weigh on Nasdaq (NQ) valuation multiples.

What to Watch Today

• Bond Market Trends: Trajectory of US and European 10-year yields during the US trading session.
• Geopolitical & Oil Developments: Shipping traffic updates in Hormuz and the Bab al-Mandeb Strait.
• Fed Outlook: Positioning across index futures ahead of next week's central bank decision.