Last updated: September 11, 2026, 2:41 PM ET
Global Bonds: The 5% Threshold Comes Into View
The relentless fixed-income rout has pushed benchmark Treasury yields to the cusp of 5%, a level that threatens to unsettle equity markets and slow the broader economy. A global bond selloff has bond bears pressing their advantage ahead of US inflation data that will shape expectations for next week's Federal Reserve decision. The 10-year yield is now flirting with that psychologically significant round number, and rising borrowing costs risk disrupting the stock market while crimping economic activity.
The pressure is global in scope. Japan's government bonds slumped on Friday, tracking the US selloff after escalating Middle East tensions drove oil prices sharply higher. Australian bonds slid in tandem, with yields jumping to their highest since 2011 as inflation concerns intensified. In Europe, German borrowing costs hit their highest level since 2009, though a subsequent decline in oil prices helped calm investor nerves somewhat.
The US Treasury's own intervention has failed to stem the tide. Treasury Secretary Scott Bessent's $6bn bond operation proved insufficient to break the "fever" in the market, investors warned, as borrowing costs continued their recent surge. Bessent nonetheless dismissed concerns about the bond market after Thursday's smaller-than-expected debt buyback sent yields to multi-year highs. The Treasury selloff accelerated as spiking oil prices fanned inflation fears and the department purchased fewer bonds than expected during its first expanded buyback operation.
The stakes are considerable. As the rout deepens, pressure grows on Bessent to restore calm to a market that has become increasingly disorderly. For those struggling to parse the technical dynamics, there is a guide to the mayhem that explains why yields rise when prices fall. Meanwhile, European debt buyers who loaded up on government bonds in recent months are likely experiencing buyers' regret after the sharp selloff, according to Bank of America. Not everyone is bearish: Jupiter Asset Management's Mark Nash is betting on long bonds to rebound from their recent selloff, arguing markets are overestimating sovereign debt risks.
Inflation and the Fed: A 90% Probability
The inflation picture has deteriorated sharply, with consequences for monetary policy. Elevated inflation has kept pressure on the Fed, with the odds of a quarter-point rate increase at next week's meeting surging to 90% after August's Consumer Price Index report. The core inflation data came in hotter than expected, prompting traders to fully price in two increases by year-end. A key inflation report remains the central focus for investors trying to gauge the Fed's next move.
The dollar has been whipsawed by the shifting rate expectations. The dollar oscillated Friday after the consumer price gauge rose more than forecast, pushing traders to add to their Fed hike bets. The WSJ Dollar Index rose 0.35% to 95.18, snapping a three-trading-day losing streak. Asian currencies consolidated against the dollar in early trade but may face pressure from safe-haven demand for the greenback.
Inflation remains stubbornly elevated at 3.4% in August, capping a week of surging oil prices. The pressure on Fed officials is mounting, with Warsh facing calls to raise rates as price pressures persist. For ordinary investors, there are strategies to protect your nest egg when inflation is ballooning, with TIPs offering one avenue for controlling the threat. The bull market's vulnerability to a Fed tightening cycle—rather than a single hike—remains a creeping concern on Wall Street, though neither an economic rollover nor a breaking point is yet in place.
Oil's Surge: $100 Crude and $6 Diesel
Crude oil has surged past $100 a barrel, rattling markets across asset classes. Oil prices hit their highest levels in months, with bond yields continuing to rise and stocks falling for a fourth consecutive session as investors worried about energy supplies and inflation. US oil topped $100 per barrel, while global benchmark Brent hit $107, fueling the global bond market selloff Thursday. Oil futures rose to their highest level in nearly four months with increased fighting across the Persian Gulf region raising supply worries.
The diesel market has been particularly strained. US diesel prices hit a new high above $6 a gallon over mounting fears that Middle East fighting could further threaten oil supplies. The record diesel price is stoking price pressures as Americans confront an affordability crunch, with the surging cost for fuel critical to agriculture and industry adding to inflation concerns. Diesel rose above $6 a gallon for the first time ever, raising the risk of further energy-driven inflation just ahead of peak demand season.
The International Energy Agency has slashed its demand outlook amid the turmoil. The IEA cut forecasts for oil demand this year and warned consumption may decline further as the Iran war drags on and consumers adjust to higher prices. The energy watchdog further reduced its outlook for global oil demand, now expecting consumption to fall by 2.5 million barrels a day in 2026 compared with its previous forecast. The IEA also warned of a potential "lost period" for global oil demand, saying the Strait of Hormuz will not reopen this year and warning of a sharp drop in demand as refined product prices soar.
Veteran commodities strategist Jeff Currie sees more pain ahead at the pump. There is an extremely high chance that average US gasoline prices will hit $5 a gallon before the midterm elections, he said, citing a toxic combination of scarcity and currency debasement. In the latest oil market analysis, Brent dropped but remained on course for a substantial weekly gain as the Iran war and Houthi threats to Saudi Arabia keep traders on edge. Oil prices slipped after surging in the previous session, as traders assessed growing risks to Middle East crude exports following fresh territorial gains by Iran-backed Houthi militants in Yemen.
The geopolitical backdrop continues to deteriorate. The Houthis have seized Perim Island in the Red Sea, with the Iran-backed militia's ground offensive reaching the Bab al-Mandab strait, a choke point for global trade. The rebel advance against Saudi-backed forces has cemented Yemeni rebels' control over a vital shipping artery and roiled energy markets. The bond selloff reignited as oil jumped to $109, with US yields reaching highs of the day after Bessent's Treasury buyback operation undershot its target. The 10-year yield neared 5% as oil topped $102 in the US and Brent hit $107, fueling the global selloff. The bond market sold off despite the buyback operation, with oil surging above $107 and wholesale inflation picking up. Oil is scary again, with wage growth and inflation adding to the unease.
US Equities: Seeking an Elusive Catalyst
US stocks have been volatile, caught between retreating oil prices and inflation worries. US stocks rallied as retreating oil prices and an earnings beat from Oracle boosted sentiment in the face of accelerating core consumer prices. The final stretch of a jittery week saw stocks climbing, with a decline in oil prices tempering concerns about inflationary pressures ahead of next week's Fed decision.
Equity bulls have been eyeing the 8,000 milestone for the S&P 500 for weeks, but getting there has proven easier said than done. Stock futures nudged higher and Treasury yields retreated slightly, but investors remained on edge ahead of crucial inflation data. The 10-year Treasury yield shied away from the 5% level as stock futures ticked up. US and European government bond yields were lower but remained near multiyear highs, with investors cautious ahead of key CPI data.
The tech sector has seen notable moves. Tesla shares have suffered a slow summer after the SpaceX IPO and an earnings rout, ending a decade and a half in which the electric vehicle giant offered the only public market bet on Elon Musk. Oracle's data centre revenue surged as its AI strategy accelerated, with faster sales growth suggesting progress in its risky push to compete in the AI infrastructure race. Oracle posted higher profit and revenue on continued cloud infrastructure strength, with gains in the cloud business offsetting falling software revenue. Adobe hit 1 billion monthly active users and raised its full-year outlook, projecting adjusted earnings between $24.45 and $24.50 a share and revenue between $26.576 billion and $26.626 billion.
In Japan, the Nikkei fell 2.8%, dragged down by chip stocks as fears about the Iran war and rising energy costs grew. Chinese GPU startups face scrutiny after Shanghai Enflame Technology shares more than doubled on their trading debut, though the real test for the company and three other "little GPU tigers" has yet to come. SoftBank Group's rally has exposed risks for investors with short positions that have risen to a one-year high. DeepSeek's latest AI model raised doubts about demand strength, giving fund managers wading back into South Korean memory stocks a fresh gut check.
UK Economy: An Unexpected Bright Spot
The UK economy has defied expectations, growing 0.4% in July in a resilient start to the third quarter. The UK economy grew on the back of an AI surge, though the resilient start comes as surging oil prices reignite inflation fears. The FTSE 100 tracked the news as the economy unexpectedly expanded in July.
The UK's energy infrastructure needs are substantial. The country needs as much as £70 billion ($94.5 billion) of investment in its power grid by early next decade, with delays threatening to add billions of pounds to consumer bills. A raft of British businesses urged Chancellor John Healey to cut levies on energy bills as rising energy costs squeeze industries from chemicals to steel.
The government has delayed a decision on the Jackdaw gasfield until after a by-election in Keir Starmer's seat, drawing criticism from Tories and Greens over the pushback of the North Sea project. Britain is considering expanding fossil fuel production at the risk of undermining its climate goals.
In aviation, a military jet triggered the UK's latest air traffic meltdown, with a flight plan submitted by one aircraft sparking turmoil that grounded thousands of planes this week. Virgin Media O2's owners are targeting £600 million in cost cuts, with Telefónica and Liberty Global seeking job cuts and other reductions to calm bond investors. UK regulators have launched a probe into KPMG over audits for a collapsed oil group, with the Big Four accountant, PKF Littlejohn and an unnamed individual facing an FRC investigation.
The UK property market has seen shifting dynamics. First-time buyers have loaded up on mortgage debt after lending rules were loosened last year, with high loan-to-income products flying off the shelves. Manchester has the highest property price growth of any UK city, and its homebuyer profile is shifting. The FT is seeking reader views on the outlook for buy-to-let following legislative changes.
European Markets: Debt, Defense and Deals
France faces a sharply higher debt burden. The country's debt interest bill will jump 25% this year, and Finance Minister Roland Lescure downgraded the GDP growth forecast for 2026. Europe is struggling to counter Russian hybrid attacks that fall short of war, with European Commission President Ursula von der Leyen making a tacit admission about the continent's vulnerability a day after Germany blamed Russia for a failed drone attack on cargo planes at Leipzig-Halle airport. The EU is looking for a new path to tap Russian assets for Ukraine, with the European Commission resuming work on finding legally sound ways to access Moscow bank funds as Kyiv's spending crunch deepens. A sanctions loophole lets UK insurer North Standard cover tankers carrying Russian gas despite government powers to restrict maritime services.
Corporate activity continues apace. ICG Plc is targeting €15 billion ($17.4 billion) for its sixth European direct lending fund as private-credit managers attract the bulk of new institutional money. UBS Group is buying back $7.9 billion of old Credit Suisse bonds, its biggest move yet to shrink the debt load inherited from its crosstown rival. Aareal Bank is working with Alvarez & Marsal on a deal to offload credit risk as the German lender pursues growth across European property markets. Essilor Luxottica's top lieutenants came to CEO Francesco Milleri's defense in an escalating war of words with Leonardo Maria Del Vecchio, a son of the founder. Private equity's "Waiting for Godot" era continues, with the mood subdued at the industry's annual conference in Paris.
In deal news, Hitachi and Platinum are said to be among bidders for part of Swarco, the traffic solutions provider owned by members of Austria's Swarovski family. China-backed MMG is urging Brussels to approve a $500 million nickel deal as European regulators prepare a formal warning, testing EU resolve over Chinese control of resources. France's Emmanuel Macron is pushing Europe to strengthen its struggling space sector. Elon Musk's gas turbines could shake up the backlogged power sector, with even the threat of market disruption potentially easing bottlenecks. Dubai is planning underground fuel tanks for its new airport as the UAE presses ahead with expansion despite the Iran war.
Asia and Emerging Markets: Flows and Pressures
India's markets present a mixed picture. Record fund inflows are fueling gains in smaller companies even as the broader stock market struggles. The Reserve Bank of India rejected some bids at a sale of shorter papers amid growing worries over stronger steps to remove excess banking cash. Bets against short-term bonds are rising, with traders wagering yields will climb on the central bank's efforts to drain excess cash. RBI Governor Sanjay Malhotra said the central bank has enough tools to absorb a record surge in banking-system liquidity following its massive foreign-currency deposit drive. India's Adani is bidding for foreign airports as it expands its airports business globally.
Japan's economic data supports further tightening. Producer prices rose at a faster pace than expected in August, supporting the case for the Bank of Japan to keep raising interest rates. The yen's recent rally marks the beginning of a broader correction in the currency's long-running undervaluation, according to Edmond de Rothschild Asset Management. Bessent's intervention in Japanese markets risks damaging the BoJ's credibility, bankers warned, with the US Treasury secretary's claims of insider knowledge potentially eroding perceptions of the central bank's independence.
In China, authorities have halted new battery factories pending a year-end review of industry capacity, according to Caixin. Chinese wafer prices steadied after dropping last week, with only limited transaction volumes. A mock AI attack on WeChat has exposed China's vulnerabilities and added urgency to AI safety talks between Beijing and Washington. Chinese AI firms have tried to clone US models, according to a risk report that also covers crypto scam victims and ABC's Jimmy Kimmel.
In other emerging markets, Peru's central bank held its key rate at 4.25% for a 12th straight month as policymakers bet the recent inflation spike will prove temporary. Iron ore headed for its steepest weekly loss since June as steel mill margins deteriorated. Copper prices found support from dip-buying following a selloff triggered by speculation the US is pushing back a tariff decision. Malaysia's UMNO has called for immediate national elections, signaling deepening tensions within Prime Minister Anwar Ibrahim's ruling alliance. South African firms are courting shareholders ahead of AGMs after new laws gave investors more power over executive pay. Australia's prudential regulator has asked banks and pensions about their exposure to private credit funding. Ebola has spread to a seventh province in the Democratic Republic of Congo after a 23-year-old man tested positive following a cross-country journey.
AI: Capital, Risk and Existential Fear
The AI boom continues to reshape capital markets. US convertible bond sales have reached their highest annual total on record as companies fund heavy AI-related spending. The Pentagon is in talks for a $5 billion loan for AI infrastructure, with Fluidstack being advised by the bank started by Palmer Luckey. The AI race has its creators fearing human extinction, with advances in autonomous agents and bitter rivalry between Anthropic and OpenAI pushing once-fringe fears into the mainstream.
Anthropic has disclosed that it stopped scientists potentially developing bioweapons with AI, citing five examples of users circumventing controls. The company blocked possible efforts to build biological weapons, adding it could not determine whether the research was legitimate or nefarious. The threat of AI-driven attacks on cyber and biological fronts threatens not just American lives but also the government. Researchers warn that "this is really bad" and that we can no longer pretend AI is safe. The question of how humans process existential risk remains a mind-bending exercise. There are calls to take AI risks seriously as governments promise a light-touch regulatory agenda. Big Tech's data centers face public backlash as the industry's promises face renewed scrutiny. The open-model problem poses a threat to AI hyperscalers. America's mounting debt could become the AI boom's biggest threat, according to Ruchir Sharma.
Prediction Markets and Consumer Trends
Prediction markets have taken off in popularity, drawing billions of dollars in trades, though some states have tried to ban them. Kalshi and Polymarket have become the subject of regulatory scrutiny, with Minnesota becoming the first state to pass a law banning them. A lawsuit filed by a federal agency may set a precedent on who gets to regulate them. Kalshi is looking to expand its rapidly growing universe of risky trading, with perpetual futures surging in popularity. Polymarket has named its first CFO as Macy's bets on pricier products.
Consumer sentiment shows signs of strain. The first interesting consumer sentiment report in a long time reveals that even Republicans are souring on the economy. Ground beef prices edged higher in August, signaling little progress in the Trump administration's offensive against record costs with only two months until midterm elections. Kroger cut its sales view, citing Cyclospora and pressured shoppers, and now expects annual same-store sales to increase by 0.2% to 0.8%, down from its previous projection of 1% to 2% growth. A three-year-old car was once the sweet spot for used-car buyers, but cheap used cars are now hard to find and average about $33,000.
The human touch is earning its place in retail. Trading screens for smiles has become a strategy in the battle for consumer loyalty, from Aritzia to McDonald's. Fast-food chains are making a big pivot back to humans, with McDonald's and Burger King boosting training to improve hospitality. In corporate governance, Barington Capital has taken a stake in Bath & Body Works and is recommending the retailer explore a sale. Weil Gotshal is losing top dealmaker Michael Aiello and five other partners to Cravath. Lineage is suing a solar-panel operator over a Los Angeles warehouse fire, seeking over $1 billion in damages. A related suit names the solar-panel company and contractor over the blaze, with Houthi militants expanding control near a strategic Red Sea chokepoint and the Amazon plane crash putting a spotlight on freight carrier 21 Air.
Energy, Utilities and Transport Roundup
In the energy and utilities sector, BPX, Tenaga Nasional and Saudi Aramco feature in the latest market talk. In autos and transport, US diesel prices, Kia and Alstom are in focus. In tech, media and telecom, Apple, CyberAgent and Adobe are among the companies drawing attention. In health care, CSPC Pharmaceutical and Raffles Medical feature in the latest market talk. US natural gas futures settled modestly higher after the EIA reported a fourth straight below-average weekly storage build, though the 40 Bcf injection landed above market expectations. Gold rose in early Asian trade as investors awaited US CPI data for clues on the Fed's rate path. Gold futures lost ground as a pickup in US producer price inflation raised expectations of a Fed rate increase. Gold rose along with US stocks and bonds despite hotter-than-expected inflation data.
Corporate and Legal Briefs
In legal news, a former Goodwin lawyer has denied insider trading on a takeover deal, with Richard Bloomfield facing five counts relating to the acquisition of maternity-wear company Seraphine Group. The Justice Department has opened an inquiry into the Los Angeles Clippers' dealings with Kawhi Leonard. McClatchy has made deep job cuts to newspapers around the country, with the owner of The Miami Herald cutting 90 journalists. Zurich and Allianz have exposure linked to Radiant World, an iron ore trader battling court claims from creditors over allegedly fraudulent documentation. Jane Street has become the leading block trader in Asia after Segantii's demise. Citadel has appointed Elliott veteran Nabeel Bhanji to lead its international equities business as Ken Griffin's hedge fund seeks to deploy more firepower outside the US. RBC BlueBay's Maya Funaki is leaving the firm. FirstFT leads with Bessent's failure to break the bond market fever, plus the US diesel price hitting $6 a gallon and a Citadel shake-up.
Politics and Policy Watch
The Republican midterm convention in Dallas has drawn attention for its messaging and its limits. Trump's "Midterm Convention" tried to reach die-hard Republican voters but lacked oomph, with the long, odd two-night TV production hoping to reach a select audience. Influencers invited to the convention largely avoided talking about the economy, working to find a message that would resonate with an audience struggling with an affordability crisis. Seven takeaways from the gathering include Vice President JD Vance as the headliner on the second night, though President Trump returned to center stage. Vance, eyeing 2028, relished the spotlight and sought to show a more personal side to the MAGA faithful. Trump's finale included the president declaring he is "a little bit tired of politics" as the convention wrapped up. Republicans courted donors with $88,600 photos and AI-sponsored suites. Some Republicans balked at Trump's $5,000 "dividend" offer to every American adult if Republicans win the midterms.
In other policy news, the Justice Department has escalated threats to states in the battle for election records, sending letters to at least 30 states demanding they retain records. Missouri's election map battle has created widespread confusion about which congressional boundaries will be in effect in November, and the Supreme Court has blocked Missouri's voting map again. Trump loyalist Joseph diGenova has quit the "Grand Conspiracy" case. Steve Witkoff made more than $250 million while in government, collecting nearly $107 million in 2025 from a holding company that includes a crypto business owned by his family and Trump's. Trump's trade war with Canada is making even sprinkle makers nervous. Mark Carney is considering further trade strikes against the US at a cabinet retreat. Trump announced $500 rebates for some Obamacare customers weeks before the election. Trump's fortune continues to grow, raising legal questions. Democrats should permit Trump a permitting win for climate gains, according to one opinion. Vance gathered unvarnished views of the Iran war behind the scenes, receiving sobering assessments that did not line up with public statements. What JD Vance knew about the war and new AI warnings feature in a news roundup. Moscow claims Ukraine planned to start a war between Russia and the UK. UK sanctions against Israeli settlers have divided British rabbis. Israel destroyed an underground Hezbollah base in southern Lebanon. Inside Tyre, the ancient Lebanese city has been engulfed by war. Izium faces a new threat as Russia advances. Hong Kong has sentenced three Tiananmen vigil activists. BRICS leaders gather in New Delhi this weekend, but wars and soaring energy prices divide them. China and India are vying for influence within BRICS, with China seeing the group as a vehicle for challenging American power. Why emerging powers keep joining BRICS even when they disagree remains a key question.
9/11: Twenty-Five Years Later
The 25th anniversary of the September 11 attacks has prompted reflection across markets and media. The CIA released dozens of intelligence documents sent to Presidents Bill Clinton and George W. Bush outlining what was known about Al Qaeda. Wall Street's recovery from 9/11 showed that when the market reopened on Sept. 17, 2001, terrorism would not paralyze the country. The WSJ recalled how staff put together coverage from a shattered newsroom. Twenty-five years later, we look back at Sept. 11, 2001. A heroic response went awry, and it is important to remember the heroism and national unity in the hours after the attacks. Trump personifies a nation moving on, having de-emphasized the war on terrorism. After 9/11, Islamophobia shaped a generation of Muslim New Yorkers, though Muslim Americans' political and cultural influence has grown. Gander, Newfoundland, the tiny Canadian town that took in stranded Americans, would do it again, though US-Canada tensions now hit home. A trillion-dollar "Trump dividend" faces hurdles amid Iran's missile build-up.
Odds and Ends
In other news, the AARP projects a 2027 Social Security COLA of 3.6%, which would be the largest since 2023. A heart drug that showed so much promise has fallen flat, stunning cardiologists. Ryanair's CEO has disputed an account of a passenger being sucked out of a plane window. ABC's Jimmy Kimmel has taken aim at the FCC over equal-time rules. The TSA may allow Pre Check passengers to bring water through checkpoints, relaxing a policy in place for more than 20 years. Apple's new iPhone duo has arrived, and consumer technology journalists have a vetting process. The US Open saw a match end at 3:30 a.m., and workers still had to clean up. The USTA has been quietly releasing tickets for its popular tournament. Bending Spoons relies on aggressive price hikes and bespoke metrics, and rising interest rates could crimp its growth. The corporate name game could cost you, and the bond rout paused ahead of inflation data. A crypto billionaire moved to Venezuela in pursuit of oil, with Fred Ehrsam living for months in a Caracas hotel. The special forces ethos drives Goruck's co-founders. A tiny Canadian town took in Americans on 9/11 and would again. Toyohiro Akiyama, Japan's chain-smoking "space antihero," has died at. Chimamanda Ngozi Adichie has found Nigeria to be a source of pain after her son's death in Lagos. Jeff Koons has made larger-than-life sculptures for five decades. The Bayeux Tapestry has returned to Britain after 1,000 years. Wellness darties are replacing keggers on campus. PayPal's CEO is planning to go it alone and fix the payments giant, with Enrique Lores potentially earning a $25 million bonus if Wall Street buys into his plans. A three-year-old car was once the sweet spot for used-car buyers. UK canned "mackerel" now contains no mackerel, risking consumer confusion. Oil, yen and egonomics captures the will of US policymakers versus the cold reality of markets. Claude thinks the author is an investment dunce, and the chatbot's patronizing tone does not help.