Bond markets still straining as Houthi strike stirs oil prices

Government bond yields continued to hit multi-year highs as oil prices rose amid reports that Houthi militants launched a new round of strikes on Saudi Arabia, while Wall Street was subdued as the likes of International Business Machines, Walmart and Sherwin-Williams weighed on the Dow Jones Industrial Average.

Meanwhile, US President Donald Trump and his Chinese counterpart Xi Jinping kicked off their presidential summit, with China’s leader stressing the importance of cooperation and stability in his first visit to the US in more than a decade, while US Treasury secretary Scott Bessent said a trade truce between the nations would be extended to January.

France’s Arnault family outlined plans to simplify its ownership of luxury giant LVMH Moët Hennessy Louis Vuitton, while Swedish retailer H&M beat earnings expectations as it focused on trimming costs from its supply chain.

And with futures pointing to a soft start to the day for the ASX, ANZ Group Holdings is reportedly looking to restructure its New Zealand IT team in the lender’s latest round of cutting costs.

Bond markets speak

Brent crude oil futures rose 3.2% to US$106.38 at 7am in Auckland as strikes by Houthi militants on Saudi cities – which were intercepted – kept commodity traders on edge, while Reuters reported US energy secretary Chris Wright had contacted US refinery executives to test their support for a voluntary restriction on diesel exports.

Reports that US and Iranian officials were discussing a deal to reopen the Strait of Hormuz took some of the heat out of oil prices, although the heightened energy prices continued to fuel inflation fears, driving up bond yields.

The yield on US 10-year treasuries climbed 6 basis points to 5.18% as investors demanded a bigger return at a lower price, widening the gap with New Zealand’s equivalent at 5.07%. The kiwi dollar traded at 56.59 US cents at 7am from 56.75 cents yesterday.

“Bond market weakness weighed on broader risk sentiment, with US equity futures soft through European trading before recovering on hopes of an agreement to restore energy flows through the Strait of Hormuz,” Bank of New Zealand senior interest rate strategist Stuart Ritson said in a note. “Moves in US rates broadly tracked oil prices, with little economic data to provide an independent lead.”

The bond market ructions continued to spill over to stock markets, with the Dow falling 0.3% in late trading, while the S&P 500 was marginally weaker and the Nasdaq Composite dipped 0.1%.

Meta Platforms extended its rally this week after announcing new smart glasses and a handheld device would integrate its recently launched Muse artificial intelligence agent, while Qualcomm dipped after renewing a global licence to supply Apple’s iPhones with processors.

Oracle Corp dropped after Bloomberg reported the tech giant invoked a force majeure notice to the developer of a data centre being built in New Mexico to put off payments if the project fails.

Superpowers meet

Meanwhile, the US-China presidential summit kicked off with both leaders underlining the need to discuss AI, amid the superpowers’ heightened competition. Taiwan also came up in a bilateral meeting, with Xi urging the US to oppose Taiwanese independence.

Separately, the Wall Street Journal reported the US had been holding talks on the sidelines of multilateral meetings with their Chinese counterparts about the Asian nation’s expanding nuclear arsenal.

European stock markets were also weaker, with the UK’s FTSE 100 down 0.2%, Germany's DAX falling 0.6% and France’s CAC 40 sliding 0.5%.

LVMH nudged up as the Arnault family announced plans to merge its two holding companies into Christian Dior, which will be delisted from the Paris stock exchange, as the French family simplifies its ownership structure of the luxury giant.

Australian futures are pointing to a 0.1% decline for the S&P/ASX 200 index when trading opens across the Tasman as the subdued tone continues into the Asian session.

The Australian Financial Review reported that ANZ was kicking off a major restructuring of its technology teams, telling New Zealand staff that more than 100 roles were expected to be made redundant and that 400 roles would be affected.

No local data are scheduled for today, while NZX-listed minnows 2 Cheap Cars and AFC Group are holding their annual meetings today.

Reporting by Paul McBeth. Image from Sirisvisual on Unsplash.