Gold Hits Record High as Global Bond Sell-Off Deepens

After remaining closed on Monday for Labor Day, US stocks closed lower in the first trading session of the month. The Dow Jones, S&P 500 and Nasdaq declined by 0.55%, 0.69% and 0.82%, respectively. 

Stocks on the other side of the Atlantic also fared badly on Tuesday. The CAC 40, FTSE 100 and Germany 40 indices sank by 0.70%, 0.87% and 2.29%, respectively. Keep reading to find out the latest market news and the outlook for the week ahead. 

Global Bonds Sell Off

Tuesday’s decline in global stocks was accompanied by a sell-off in government bonds, as concerns grow about rising debt in major economies. 

In the UK, long-term borrowing costs hit their highest level since 1998, as the yield on 30-year gilts rose to 5.72% (bond yields move inversely to price). Consequently, the pound dropped sharply, declining 1.2% against the US dollar. 

Similarly, yields on 30-year German, French and Dutch bonds also rose to their highest levels since 2011. The spike in French bond yields comes ahead of a key confidence vote in prime minister François Bayrou on 8 September. 

Across the Atlantic, US Treasury yields also rose across maturities and continued their upward trajectory on Wednesday morning.  

The rise in US Treasury yields followed Friday’s appeals court ruling that most of Washington’s sweeping tariffs are unlawful, jeopardising a source of potential government revenue. 

Meanwhile, as government borrowing costs grew, gold prices hit record highs, as investors sought out safe-haven assets. Since 2023, gold prices have almost doubled amidst global uncertainty. 

Google Spared from Breakup in Courts

Google parent Alphabet’s shares soared in after-hours trading, as investors cheered the outcome of its antitrust case in the US. 

Last year, Google was found to hold an illegal monopoly in online search, but the tech giant was spared the most serious consequences in a ruling on Tuesday.  

The US Department of Justice had been pressing for penalties which included the forced sale of Google’s Chrome browser.  

However, the decision on Tuesday stated, “Google will not be required to divest Chrome; nor will the court include a contingent divestiture of the Android operating system in the final judgement”. 

Another key area of focus had been the exclusive contracts Google holds for distribution, such as with Apple, which Google pays billions of dollars to be the default search engine on iPhones. 

US District Judge Amit Mehta ruled that Google could pay to preload products, however, it will be barred from entering exclusive distribution contracts. Furthermore, Google will be required to share certain data from its search operations with competitors.  

Apple shares also popped in after-hours trading on the news. 

What to Look Out for This Week

The centre piece of the economic calendar this week will be Friday’s Employment Situation report from the US Bureau of Labor Statistics. 

According to the CME FedWatch tool, markets are currently pricing in a 92% chance that the Federal Reserve will cut rates by 25 basis points when its rate-setting committee meets later this month. 

Slow growth in the labour market would further enhance these expectations. However, if the job report comes in better-than-expected and next week’s inflation data worsens, it could cause expectations to shift. 

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