Morning Brew September 2 2026

Good morning.

The market is again being driven by a familiar chain reaction: Middle East escalation pushes oil higher, higher oil revives inflation fears, inflation fears lift yields, and higher yields weigh on equities and precious metals.

Global bonds sold off sharply on Wednesday as the Middle East conflict pushed energy prices higher and investors again worried about inflation, government debt and the rising cost of money. The U.S. 10-year yield reached 4.81%, and a move toward 5% would be difficult for already nervous equity markets to ignore.

Sovereign yields remain the reference point for almost everything else. Higher borrowing costs mean higher mortgage rates for consumers, tougher refinancing conditions for companies and less room for governments just as fiscal concerns are already part of the market discussion.

Japan is also part of the move. The 10-year Japanese yield is above 3%, a 30-year high, while Australian 10-year yields have moved above 5.1%, the highest level in more than 15 years. In Europe, German Bund futures are at their lowest level since 2011 and French OAT futures have fallen to a record low.

The immediate trigger remains the U.S.–Iran escalation. Washington and Tehran are back on a war footing after the most significant exchange in weeks. The U.S. military said it completed a wave of strikes against Revolutionary Guard targets, including air-defence sites, radar systems, maritime assets, mine-laying capabilities and communications infrastructure. Iranian media reported several attacks near the Strait of Hormuz, keeping oil-shipping risk firmly in focus.

The Bank of Japan is also adding to the rates story. Governor Kazuo Ueda said the central bank will debate a possible rate increase, including at the September meeting, with inflation risks now the key question.

FX is calmer than the bond market, this is caused by the fact that most yields except for the Swiss are moving parallel. EUR/USD is around 1.1580, GBP/USD near 1.35 and USD/JPY close to 160. The Swiss franc has weakened to roughly 0.8125 against the dollar and 0.94 against the euro. Gold and silver have pulled back to around 4,320 and 64 as negative carry and higher yields bite.

U.S. equities fell for a third consecutive session. The S&P 500 dropped 0.7% to 7,631.47, the Nasdaq 100 lost 1.3%, and the Dow declined 0.8% to 52,766.88, breaking below its 50-day moving average. Energy outperformed, while consumer discretionary and technology led the decline.

CrowdStrike fell almost 7%, transportation stocks were hit hard, and Micron weighed on semiconductors after reports of threatened strike action at its Taiwan operations. Apple bucked the trend after John Ternus took over as CEO from Tim Cook, while Deere reached an all-time high. After hours, Dell rose about 7% after raising its annual sales outlook by USD 25 billion on strong demand for AI servers.

Europe was also weaker, ending a five-month winning streak. The Stoxx Europe 600 fell 0.6%, the DAX lost 1.1%, the Euro Stoxx 50 declined 0.8%, and the FTSE 100 slipped 0.3%. Rolls-Royce weighed on both the Stoxx 600 and FTSE 100, Partners Group fell 7.3%, and SAP lost 3.5%. Novartis was one of the few bright spots, rising 6.3%.

 Higher rates are back: The winners and losers of 5% bond yields

• Cash flow matters more when money is expensive: Companies with strong free cash flow, low leverage and limited refinancing needs are better placed to keep investing and returning capital even when borrowing costs stay high.
• Higher rates create clear winners and pressure points: Quality financials, energy, commodities and defensive sectors can prove more resilient, while small caps, property, consumer discretionary and long-duration growth face a higher funding or valuation hurdle.
• The reason rates are high still matters: Strong growth can support financials and commodities, while inflation shocks or fiscal stress are more challenging for equities broadly. Higher rates call for selectivity, not simply abandoning risk.

The key question now is the path of yields. The U.S. administration will be deeply uncomfortable with these levels, especially heading into the midterms. If the White House wants to change the narrative, it needs to deliver on lower prices, no foreign wars and lower borrowing costs — or find a very convincing distraction.

Tomorrow I am off and will be back on Friday. Trade safely.

Wednesday, 2 September 2026
Macro: Euro-area building permits; U.S. ADP employment report.
Central banks / speakers: Bank of Canada rate decision.
Corporate earnings: No major global large-cap focus.

Thursday, 3 September 2026
Macro: Swiss CPI PMIs for the euro area and Germany; euro-area PPI; U.S. initial jobless claims and trade balance; U.S. ISM Services PMI.
Corporate earnings: Dell and Palo Alto Networks expected.

Friday, 4 September 2026
Macro: Euro-area retail sales; U.S. nonfarm payrolls, unemployment rate and average hourly earnings; Canada employment report.