Global bond rout drives borrowing costs to multi-decade highs as AI stocks hold firm
This week @ 15:30 Friday 2nd October in London.
Markets:
- FTSE 100 fell 2.04% this week to 10,477.05, as a global bond sell-off pushed UK borrowing costs sharply higher. Thursday was the index’s worst day since May, with banks, housebuilders and domestically focused stocks leading the declines.
- S&P 500 fell 0.95% this week to 7,669.59, as rising Treasury yields and inflation concerns weighed on most sectors. Technology and energy were the main areas of strength.
- Nasdaq Composite rose 0.71% this week to 27,261.91, the only major US index to gain on the week. AI-linked technology names led, and stocks rallied on Friday after weaker US jobs data pulled yields lower.
- STOXX Europe 50 fell 0.93% this week to 5,303.70, as higher bond yields weighed on risk appetite and banks led Thursday’s broad European sell-off.
Bonds:
- UK 10-year gilt yields fell 7.5bps this week to 5.34%, after a volatile week. Yields touched around 5.5% on Thursday, their highest since July 2007, and 30-year yields crossed 6% for the first time since 1998. Yields then eased on Friday as pressure on global bond markets subsided.
- US 10-year Treasury yields rose 4.2bps this week to 5.20%. Yields reached their highest level since 2002 on Thursday on oil-driven inflation concerns, then fell back on Friday after a much weaker-than-expected September jobs report.
Commodities:
- Brent crude rose 2.39% this week to $99.77/bbl. Reports that the US is sending a third aircraft carrier and 10,000 additional personnel to the Middle East raised the risk of renewed conflict with Iran. Prices eased on Friday on reports that European countries are considering a strategic fuel reserve release.
- Gold fell 2.42% this week to $4,216.50/oz, as surging bond yields, a firmer US dollar and higher Fed rate hike expectations reduced the appeal of the non-yielding metal.
- Copper fell 2.36% this week to $6.606/lb, its biggest weekly loss since May. High energy costs, a stronger dollar and weak Chinese industrial data weighed on prices, and China’s Golden Week holiday thinned trading.
FX:
- GBP/USD fell 0.28% this week to 1.3211. Sterling touched its lowest level since late June on Thursday as investors sold gilts and the pound together.
- GBP/EUR rose 0.99% this week to 1.1743. An upward revision to UK Q2 GDP and hawkish Bank of England commentary supported sterling, while French fiscal concerns weighed on the euro.
Macro
- US: Non-farm payrolls rose by 29,000 in September, against forecasts of 84,000. Unemployment rose to 4.2%, and August was revised down to 133,000. Markets moved to price a high probability that the Fed will hold rates at its 28 October meeting.
- US: Softer-than-expected PCE inflation on Wednesday cut the market-implied probability of an October rate rise to around 34%, from almost 70% earlier in the week. The Fed raised rates in September for the first time since 2023.
- UK: Q2 GDP was revised up to 0.5% q/q, from 0.4%. BoE external MPC member Catherine Mann said UK financial conditions are not tight enough. Markets are pricing a rate rise in November or December.
- Eurozone: Headline inflation rose to a three-year high of 3.8% in September, with core at 2.5%.
- Geopolitics: The Pentagon is sending the USS Theodore Roosevelt and 10,000 sailors and Marines to the Persian Gulf, making it the third US carrier heading to the region. President Trump has reportedly told aides he expects to resume strikes on Iran in November.
Company news:
- Nvidia rose 2.9% on Friday to its first record high since May. This extends a rally of nearly 25% from its late July low, and its market value is approaching $6 trillion.
- CrowdStrike reached a fresh all-time high this week amid strong demand for AI-driven cybersecurity.
- Alphabet gained 1.5% on Thursday after unveiling Gemini 4 Argon, its most advanced AI model to date.
- British American Tobacco went ex-dividend on Thursday for its 61.26p quarterly payment. It was among the FTSE 100’s largest early fallers that day.
What we will be keeping an eye on next week…
w/c 5th October 2026
- Monday 5 October: US ISM services PMI (September), a further read on activity and price pressures after this week’s soft payrolls data.
- Wednesday 7 October: Minutes of the Federal Reserve’s September meeting, for insight into the outlook for further rate rises ahead of the 28 October decision.
- Thursday 8 October: Chinese markets reopen after the Golden Week holiday, relevant for copper and wider commodity demand.
Enjoy the weekend
Markets move constantly and the numbers in this update will change. This is a snapshot only, pulled together from a range of sources, and is meant as a quick guide rather than a precise record. It’s not investment advice and shouldn’t be used to make trading or investment decisions. If you need more accurate or specific data over a defined period, please get in touch with a member of the team who will be happy to help.
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This article is for information only and does not constitute advice or recommendation and you should not make any investment decisions based on it. The views and opinions of this article are those of Casterbridge at the time of writing and may change without notice. Any opinions should not be viewed as indicating any guarantee of return from investments managed by Casterbridge nor as advice of any nature. It is important to remember that past performance and the value of an investment, and any income from it, may go down as well as up and the investor may not get back the original amount invested.