Global Markets Split: UK Growth Beats, Bond Yields Spike, and Oil Surges

Key points

• UK GDP grew 1.6% year-on-year in July, beating the 1.2% consensus, driven by services sector expansion.
• The 10-year US Treasury yield rose to 4.955%, nearing 5%, as investors reacted to inflation risks and heavy supply.
• Brent crude oil futures rose 0.54% to $108.21 per barrel amid escalating Middle East conflicts and supply concerns.
• Oracle reported adjusted earnings of $1.92 per share, exceeding the $1.74 estimate, driving a 6% stock surge.
• Chinese AI chipmaker Enflame jumped 206% on its Shanghai debut, becoming the last of the 'four little dragons' to list.

Background

Recent market volatility has been driven by AI sector valuations and geopolitical risks. Earlier reports indicated oil prices had already hit $100 per barrel, and Wall Street firms warned the AI stock boom might be peaking. The current bond market sell-off follows previous spikes in yields, reflecting ongoing fiscal concerns and inflation pressures.

Why it matters

The divergence between strong UK growth and rising bond yields highlights the tension between economic performance and fiscal sustainability. High oil prices and bond yields could erode fiscal headroom and impact currency values, while the surge in AI chip stocks signals continued investor appetite for domestic alternatives to US technology despite global market weakness.

What to watch

Investors are awaiting the US consumer price index report and Federal Reserve policy decisions to gauge inflation trends. The US Treasury is expected to sanction a large bank on Monday, potentially impacting financial flows. Market attention will also focus on whether the government's bond buyback program can stabilize long-term yields.