Rising oil prices intensified inflation and interest-rate concerns as the S&P 500 fell 0.58 per cent and selling extended into regional markets in the next session. Brent eased to around 105 dollars after rising roughly 6 per cent to 107 dollars and reaching its highest level since May. Higher bond yields added pressure to equity valuations.
The S&P 500 ended Thursday down 0.58 per cent at 7,591.75. A jump in oil prices and rising US Treasury yields deepened investors' concern about inflation and the Federal Reserve's decision next week. Asian shares then declined on Friday as they tracked Wall Street's losses. Selling that began in the US session therefore carried into the new trading day as a broader move away from risk across regional markets.[1], [2]
Brent crude rose roughly 6 per cent to 107 dollars on Thursday and reached its highest level since May. The price slipped to around 105 dollars in Asian trading, retaining most of the preceding increase. Oil at that level complicates the inflation outlook through energy costs. For equity markets, the pressure combines higher input costs with the possibility that tighter monetary policy in response to inflation could make financing conditions more demanding for companies.[1], [2]
Futures pricing raised the perceived chance of at least a 25-basis-point Fed increase next week to about 70 per cent from roughly 64 per cent. When expectations for a higher policy rate feed into longer-term bond yields, the present value of future corporate earnings declines and equities can become less attractive. Declines across two successive sessions showed the oil-inflation-rate chain being priced across different markets at the same time.[2], [1]
