US equities weaker, weighed by AI jitters which dragged down tech stocks. Brent crude up over 3%. US Treasury yields higher before plunging as investors return

Equity markets are weaker, with the tech sector acting as a significant drag. US long-term Treasury yields are lower, having fallen sharply after pushing up to recent highs. Brent crude rose towards USD106 before easing following soothing words from President Trump, although prices remain elevated amid tensions in the Middle East. Currency movements have been modest, with the NZD hovering around 0.56.

Brent crude climbed steadily to just below USD106 per barrel, supported by evidence that Iran had recently stepped up its attacks in the Strait of Hormuz and areas well beyond, reports that the Houthis had struck two airports in Saudi Arabia, and cuts to US production ahead of the first Atlantic hurricane of the year. Yesterday, The Atlantic also reported that the US could attack Iran before the US mid-term elections, noting that the White House had asked the Pentagon to develop strike options against Iranian targets.

Overnight, President Trump poured cold water on that report, posting on Truth Social that the US was having “productive discussions” with Iran and that “we will not be attacking Iran at any time prior to the Midterm Elections”. Oil prices fell following the post, but Brent crude is currently trading near USD104 per barrel, still up more than 3% for the day.

Market jitters remain evident in the rates market. The US 10-year yield reached an overnight high of 5.35% before buyers returned; it is currently trading at 5.23%, down 5bps on the day and a chunky 8bps below the NZ close. The decline was aided by oil prices retreating from their high and selling pressure in US equities, as noted below. After reaching a fresh multi-decade high of 5.73%, the 30-year yield also moved lower, with buyers returning even ahead of the auction of USD22bn of 30-year notes. The auction subsequently cleared at 5.62% with strong demand, with the yield falling a touch further afterwards.

In Fed-speak, Governor Waller said he anticipated additional hikes to support a timelier return of inflation to 2%, “but there is some flexibility about when those hikes will occur…the hikes do not need to come at consecutive meetings”. This framing echoed comments from Jefferson and Williams, who were wheeled out last week to deliver a message to a market that had become too highly convicted in pricing an October hike. Three of the most influential policy-setting members have now signalled that, in the absence of a significant data release or shock suggesting otherwise, the Fed will not hike later this month.

Moves in currency markets have been modest. The NZD has been directionless over the day, hovering around 0.56, while the AUD is flat at around 0.6960. Movements in NZD crosses have been insignificant.

US equities are weaker, weighed down by tech stocks after the FT reported that OpenAI’s annualised revenue is approaching USD50bn, about USD20bn less than previously reported. A modest decline in the S&P 500 subsequently morphed into a larger 0.7% fall, while the Nasdaq is currently down 1.5%. Reflecting nerves in the AI sector, Australian data centre company Firmus, which had been looking to list at an implied valuation of around AUD44bn, is set to postpone its IPO.

The domestic rates market had another session of limited movement. NZGB yields were marked flat to 2bps lower. There was strong demand at the weekly bond tender, with relatively little duration risk to absorb. In the swap market, the 2-year rate was marked 1bp lower at 4.03%, while the 10-year rate was unchanged at 4.81%.

On the economic calendar, Canada’s labour market report is released tonight, while the University of Michigan consumer survey is due in the US.

Jason Wong is the senior Markets Strategist at BNZ Markets.