GGMA Markets Briefing: Stocks and Bonds Fall as US-Iran Strikes Lift Oil / RBNZ Hikes Again, But NZDUSD Declines
Stocks, bonds and gold fell as renewed fighting between the US and Iran drove oil higher and added to expectations that the Federal Reserve and other central banks will raise interest rates this month (BBG). Bloomberg reports that global bond yields are at their highest since 2008 and that traders now put the odds of a September hike above 50% for four major central banks (BBG). Homin Lee, a senior macro strategist at Lombard Odier, said the weak sentiment is driven by the combination of renewed Hormuz worries and rising global bond yields, and that higher-beta markets are showing wilder swings within a volatile boom phase (BBG). Rajeev De Mello, a global macro portfolio manager at Gama Asset Management, said higher yields at these levels are a clear headwind to Asian equities, especially longer-duration tech stocks (BBG).
In stocks, the Nikkei fell 2.6% to 64,440, the CSI 300 lost 1.3%, the ASX dropped 0.8% and MSCI's emerging-market index fell 0.6%, while Korean shares posted the region's steepest decline (Reuters). MSCI's Asia Pacific gauge fell to a one-week low with all eleven industry groups retreating, dragging the global equity index to its lowest in almost a month (BBG). The S&P 500 and the Nasdaq closed lower on Tuesday as the surge in government bond yields weighed on equities (Reuters). S&P 500 futures were little changed and Nasdaq futures were down 0.2%, while European futures pointed lower, with the Euro Stoxx 50 down 0.4%, the DAX 0.5% and the FTSE 0.4%.
Regarding the RBNZ, the Reserve Bank of New Zealand raised the Official Cash Rate by 25 basis points to 2.75% from 2.50%, its second consecutive increase, as expected (BBG). Governor Anna Breman said a further increase is likely but that the timing is highly uncertain because the committee wants to see the effect of the two hikes already delivered (BBG). The new projections show third-quarter inflation above the May forecast and a return to the 2% midpoint in early 2028 rather than late 2027 (BBG). The statement said gradually removing stimulus remains appropriate and that more persistence in energy prices could lead to stickier inflation over the medium term (WSJ). Swaps cut the probability of an October hike to around 36% from 65% before the meeting, while a move by December stays close to fully priced (BBG).
Regarding the RBA, Australian GDP rose 0.4% q/q in the second quarter against a 0.3% consensus, and 2.1% y/y against 1.8% expected, from 2.5% in the first quarter (BBG). Household consumption rose and added to growth, and the three-year yield rose as much as eleven basis points to its highest since March as investors lifted expectations that the hiking cycle will extend into next year (BBG). TD Securities now sees the RBA raising its rate to 4.6% at the September meeting. Bloomberg Economics argued that headline growth overstated underlying strength because of lumpy data-centre investment, a rebound in mining exports and the fuel-price response (BBG).
In Japan, Governor Kazuo Ueda said the BoJ will debate raising rates, including in September, with a focus on whether upside price risks are heightening, in his last public remarks before the pre-meeting blackout (Reuters). He said the bank hopes to keep raising rates as conditions remain accommodative but must assess the cumulative impact of five hikes, and confirmed meeting Treasury Secretary Bessent after a US statement called for decisive monetary steps against the weak yen (Reuters). Board member Hajime Takata said the bank should raise rates nimbly rather than at a fixed semiannual pace, calling 2026 a regime change, and that it must show its determination to prevent upward deviations in prices (Reuters). Finance Minister Satsuki Katayama said Japan will keep a close watch on the yen after the Treasury statement noted the currency's undervaluation and its role in driving inflation (WSJ).
In Europe, ECB Governing Council member Gabriel Makhlouf told the Financial Times he is uneasy about euro-area inflation staying above 3% while growth has proved stronger than expected, and that the ECB must be prepared to raise rates further if inflation moves in the wrong direction, while adding that next week's decision will not surprise anybody (Breakingthenews). Bundesbank President Joachim Nagel told Le Monde that markets see a probability above 95% of a September hike, that he is cautious about giving any indication beyond September, and that a meeting-by-meeting approach will serve the Council well (BBG). Euro-area headline inflation rose to 3.3% y/y in August from 2.9% in July, the highest since September 2024, with energy inflation accelerating sharply while core dipped to 2.4% from 2.5% (CNBC).
Currently, STIR traders price 17 basis points of tightening for the Fed's September meeting, a 68% probability of a rate rise, and 39 basis points cumulatively by December. Bloomberg reports that Chair Warsh's Jackson Hole speech fuelled the repricing and that Bessent's expanded buybacks have not eased investor unease about long-dated Treasuries (BBG). For the ECB, markets price 25 basis points of tightening for the September meeting, a fully priced rate rise, and 48 basis points cumulatively by December. For the BoJ, markets price 26 basis points of tightening for the September meeting, more than fully priced, and 48 basis points cumulatively by December. For the RBA, markets price 18 basis points of tightening for the September meeting, a 73% probability of a rate rise, and 35 basis points cumulatively by December.
In currencies, the New Zealand dollar fell 0.8% against the US dollar to 0.5846 after the RBNZ's cautious guidance (BBG).
The yen firmed 0.4% against the dollar to 159.57 after the Treasury statement and the hawkish BoJ remarks, still close to the 40-year low that the last round of joint intervention failed to reverse (WSJ). The won firmed 0.5% against the dollar to 1366.65. The dollar index was little changed at 99.728, the euro eased 0.1% to 1.1581, and the Australian dollar was unchanged at 0.7145 after the GDP data. The yuan was little changed at 6.7226 per dollar and remains near its strongest since early 2023, as capital controls and low foreign bond holdings cushion it from the record-wide gap between US and Chinese yields (BBG).
In bonds, the US ten-year yield was at 4.80%, up 0.4 basis points, after touching its highest in almost three years overnight (Reuters). The thirty-year yield was at 5.28%, up 0.8 basis points, less than ten basis points from its 19-year peak (BBG). Bloomberg reports that investors have paid millions in premium for Treasury options that pay out if yields keep rising, including a position targeting a 30-year yield of 5.7% by the end of November, and that neutral positioning in a client survey is at its lowest since September 2025 (BBG). The Japanese ten-year yield was at 3.03%, up 2.0 basis points, and the two-year at 1.86%, up 6.6 basis points, the highest since 1995 (Reuters). The Australian ten-year yield was at 5.22%, up 4.1 basis points, at a level last seen in July 2011 (BBG). Bund futures fell 0.3% with German ten-year yields at their highest since 2011 and gilt yields at their highest since 2008 (Reuters). Reuters reports that European and UK yields are being driven by higher inflation expectations, while the US long end is driven more by real yields (Reuters).
In commodities, Brent rose 1.0% to 95.59 and WTI rose 0.6% to 90.78 after the US carried out a second day of strikes on Iran and struck two Iranian government vessels under a new tanker-for-tanker policy, while Iran retaliated against Jordan, Bahrain and Kuwait (BBG). Two tankers carrying Saudi oil were hit within minutes of each other while crossing the Omani corridor the US set up to break Iran's chokehold, which maritime-security firms said undermines any assumption that the corridor is a reliably protected passage (WSJ). Bessent said a record 17 million barrels of crude exited Hormuz on Monday and that total flows, including pipelines, exceed pre-war levels, while Energy Secretary Wright said exports are averaging about 8 million barrels a day with a further 4 to 5 million bypassing the strait by pipeline (BBG). The API reported a 2.6 million barrel draw in US crude inventories, which would be the first decline in five weeks if confirmed by the EIA today (Bloomberg). European gas futures rose to the highest since January 2023, with storage only about 65% full, the lowest seasonal level in records back to 2009, and one month left to build inventories before winter (BBG). Gold fell 0.2% to 4,322 dollars an ounce, a fourth daily decline (BBG), and copper fell 0.9%. Bitcoin rose 0.3% to 77,659.
In geopolitics, Trump said the strikes were retaliation for Iran's attempt to mine the strait, Central Command said it hit air-defence sites, radar, mine-laying capabilities and communications, and Jordan reported engaging 13 ballistic missiles that entered its airspace (WSJ). Trump said he could not care less whether Iran signs a deal and that he is not trying to force Tehran to the bargaining table (BBG). The IAEA said it still cannot verify the location or status of Iran's stockpile of near-bomb-grade uranium and urged Tehran to allow inspectors back with the utmost urgency (Bloomberg). Bessent said the US and China agree that the Strait of Hormuz must remain open, and the G20 chair's statement expressed concern at continued energy-trade disruptions and stressed freedom of navigation (LS). IMF Managing Director Georgieva said the 2026 global growth outlook has firmed at around 3% (LS).
In corporate news, Dell jumped 8% in extended trading after raising its annual sales forecast, and Nvidia is said to be in advanced talks to acquire the AI startup Hugging Face in a 14 billion dollar deal (BBG).
Data and the day ahead: South Korea's inflation accelerated in August, which the Bank of Korea attributed to a base effect, and it expects September to be lower while underlying pressure persists in core items (Breakingthenews). Japan's monetary base contracted 15.7% y/y in August from 13.8%. Still to come: ECB Governing Council member Wunsch speaks at 09:10 CET. ADP private payrolls at 14:15 CET, where economists look for a modest pickup from July, is the first of the week's US labour prints ahead of Friday's payrolls. The Bank of Canada decides at 15:45 CET and is expected to hold, with analysts looking for a neutral statement that puts more emphasis on inflation risks and the external backdrop, followed by the press conference at 16:30 CET (LS). US factory orders and final durable goods for July are at 16:00 CET, the EIA crude inventory report at 16:30 CET will test the API draw, and the Fed's Beige Book is at 20:00 CET. Fed Governor Waller speaks on Thursday and US payrolls follow on Friday.
Time Stamp: 2 September 2026, 08:09 CET