Global Markets-Bonds unsettled as oil and gas climb, earnings loom for AI

The escalating conflict in the Gulf lifted oil and gas prices on Monday, fanning fears of inflation, sending bonds lower and leaving stocks on edge as a packed week of major tech earnings is set to further test the artificial intelligence trade. Brent crude climbed above $90 a barrel for the first time in more than a month as the U.S. military started a ninth straight day of attacks against Iran, which in turn struck targets across the region. Just a handful of ships transited the Strait of Hormuz on Sunday and Tehran claimed to have hit two. In Europe, the focus was also on gas prices, where the benchmark TFMBMc1 hit €60.00 ($68.63) per megawatt hour for the first time since mid-March. The jump in fuel costs has revived worries about inflation even after U.S. consumer price data surprised on the downside last week, leading futures markets to price in at least one Federal Reserve rate hike by year-end. That sent U.S. yields higher, with the benchmark 10-year Treasury yield at 4.55%, while yields on 30-year Treasuries US30YT=RR are back above the psychological 5.0% barrier. This is a level that tends to attract funds away from equities and toward fixed income, while lifting the valuation bar for future corporate earnings. Money markets see more tightening from the European Central Bank, which they see as likely to raise rates again in September and are pricing an 80% chance of a further move by year-end. That sent the policy-sensitive German 2-year yield as high as 2.817% on Monday, its highest in two years. Those higher energy prices and yields kept equity markets in check on Monday, with Europe's broad index flat, as a 1% gain in energy stocks balanced losses elsewhere. U.S. futures were a whisker higher though MSCI's broadest index of Asia-Pacific shares outside Japan dipped 0.3%, as South Korea's chip-heavy market lost a further 4.1%. It dived almost 9% last week in wild trade as retail investors were squeezed out of leveraged positions. Chip investors are also still digesting Friday's news from Chinese AI firm Moonshot, which said it had a new open-weight model, Kimi K3, that delivers performance approaching U.S. giant Anthropic's frontier Fable model. All of which raises the stakes for this week's rush of quarterly results, which include Alphabet GOOGL.O, Intel INTC.O and Tesla TSLA.O. BofA analyst Savita Subramanian remains upbeat on the earnings outlook, tipping a 5% beat versus consensus, or 28% growth. Tech is expected to drive over half of growth, with semiconductors expected to rise around 130% year-on-year. The excitement in currency markets was with sterling, as Andy Burnham is set to become Britain's seventh prime minister in a decade. The pound rose 0.17% on the dollar to $1.3475 and was also firmer on the euro at 84.91 pence to the common currency, continuing its recent gains, as the swift and relatively drama-free leadership transition causes traders to unwind some short positions. British gilts were slightly underperforming European peers. Other currencies were muted with the euro steady at $1.1442 and the Japanese yen also flat at 162.36 per dollar. Precious metal markets were also muted, with spot gold flat at $4,019 an ounce.

Global Markets-Bonds unsettled as oil and gas climb, earnings loom for AI

Oil, gas and yields pressure bonds

Inflation worries revive rate-hike bets

Equities steady as investors await major tech results

Sterling gains as leadership transition steadies markets

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