MARKET SNAPSHOT

Stocks declined and the 10-year U.S. Treasury yield briefly broke above 5% as widening instability in the Middle East pushed up oil prices, deepening investor concerns about inflation. Gold prices dropped as the dollar strengthened.

MARKET WRAPS EQUITIES

U.S. stocks fell after Anthropic Chief Executive Dario Amodei called for a slowdown in artificial-intelligence development and as another increase in oil futures triggered interest-rate worries.

The Dow Jones Industrial Average retreated 0.3%. The S&P 500 lost 0.5% and the tech-heavy Nasdaq composite fell 0.6%.

Saudi Arabia shut down an East-West pipeline that was a key alternative to the Strait of Hormuz. Iran-backed Houthi militants tightened their grip on another critical energy-shipping chokepoint, the Bab al-Mandeb strait.

The rise in oil futures and refined fuels increased inflation and rate expectations.

"Diesel in particular - that's what we use to get everything everywhere so it's concerning when you see these spikes in prices and it's hard to see how it's going to be going down any time soon," said J.D. Joyce, president of Houston financial advisory Joyce Wealth Management.

Earlier Friday, most markets in Asia declined.

China's Shanghai Composite Index and Shenzhen Composite Index both slipped 0.1% The tech-focused ChiNext Price Index gave back 1.1%. Hong Kong's Hang Seng, however, added almost 0.5%.

Korea's Kospi index dropped 3.3% as mega-cap chip makers SK Hynix and Samsung Electronics lost over 6% and 4%, respectively.

Japan's Nikkei was dragged 0.8% lower by a more than 10% fall for prominent OpenAI-backer SoftBank Group.

Stocks in Australia edged higher, as the S&P/ASX 200 increased 0.1%. New Zealand's S&P/NZX 50 Index declined 0.1%.

COMMODITIES

Oil prices rose after attacks shut a key Saudi oil pipeline and Houthi militants in Yemen tightened their grip on the Bab al-Mandeb Strait, adding pressure on Middle East crude-export routes already constrained by the U.S.-Iran conflict.

Front-month Brent crude oil futures rose 1%, to $105.68 a barrel, while front-month West Texas Intermediate settled up 1.3%, at $101.39 a barrel. The benchmarks ended the session well off earlier highs of $109.80 and $104.35, respectively.

"Prices have been elevated so much that any kind of a news flash can cause a drastic selloff," Dennis Kissler, senior vice president of trading at BOK Financial, said. There is most likely something behind Trump's comments, but "until there's concrete evidence that Ukraine is going to lighten up on Russia, or that we get more oil flow coming out of the Middle East, the market's going to remain extremely volatile," Kissler added.

Gold futures ended the session off their intraday lows as oil prices eased from highs and Treasury yields pulled back.

Gold traders are mostly focusing on this week's Fed meeting as expectations of an interest-rate hike increased following the latest payrolls and inflation data.

The question for gold is whether safe-haven demand can outweigh the pressure from higher yields, GivTrade technical analyst Waleed Said said. "Geopolitical uncertainty is providing structural support, while sticky inflation and the prospect of higher interest rates are preventing the safe-haven trade from translating automatically into higher gold prices."

Front month gold slid 1.3% in New York at $4,310 a troy ounce. Silver dropped 1.6% to $63.513 a troy ounce.

TODAY'S TOP HEADLINES

U.S. 10-Year Yield Cools After Topping 5%, German Bund Yield Hits 15-Year High

U.S. Treasury yields lost steam after reaching multiyear highs on Monday as investors grapple with the prospect of rising borrowing costs amid volatility in energy markets.

The 10-year Treasury yield rose past 5% for the first time since October 2023, before stabilizing slightly lower. The move mirrored oil prices, which rallied nearly 5% in early trade before easing to a 1% gain Monday afternoon. The dollar followed, strengthening in the morning against major currencies, then cooling later in the day.

The 10-year German Bund yield hit another 15-year high of 3.538%.

BOE Expected to Hold Key Rate, Slow Down Quantitative Tightening

The Bank of England is set to keep interest rates on hold this week, though rate-setters will likely leave the door open to more tightening as tensions in the Middle East escalate further.

Investors are also likely to focus on the continued, albeit slower, reduction of the central bank's sovereign-debt portfolio, as yields on those bonds, known as gilts, have reached multidecade highs.

The bank has maintained its key policy rate at 3.75% since December last year, at a time when policymakers were anticipating rate cuts and inflation set to decline heading into 2026.

Trump Sees Race Against China as Key Issue on AI Regulation

WASHINGTON-President Trump and White House AI adviser David Sacks this weekend defended the administration's strategy of minimal regulation after the heads of the nation's top artificial-intelligence companies endorsed a coordinated slowdown in the technology's development.

"We can put up guardrails, and we can do this and that, but I think you have a lot of negative forces that are bringing it up," Trump told reporters Sunday while traveling in Ireland. "And they're bringing up things that won't happen."

The president reiterated his belief that the U.S. must outpace China in building AI, saying "whoever wins AI wins."

Microsoft Sets Limits for AI Models as Altman Details Control Risks

Microsoft has published a provisional code of conduct that it aims to apply when training new artificial-intelligence models, the latest company to discuss limits on advanced AI systems as OpenAI's chief executive warned companies risk losing control of their AI systems.

Mustafa Suleyman, the CEO of Microsoft AI, told CNBC Monday that the company had been working for months on the new guidance, which includes principles it describes as "humanist AI," but chose to publish it now given the current debate around AI.

Microsoft's AI models must not consider requests related to weapons manufacturing, produce violent or sexually explicit content or help with the procurement of dangerous substances, according to the code. AI models shouldn't be built to imitate consciousness and shouldn't be entitled to rights, the code said.

Bank of America CEO Sparks Bank Stock Selloff With One Small Word

Shares of Bank of America turned sharply lower on Monday after the bank's chief executive, Brian Moynihan, said quarterly sales and trading revenue would be "flat" relative to a year ago.

"It'll be one of the better third quarters we've ever had-but it'll be relatively flat to last year, because last year was a big recovery from the second quarter," Moynihan said at a conference held by Barclays, referencing Wall Street's big trading hauls in 2025.

Investment banking fees, meanwhile, are set to decline about 10% from a year ago, he said. Bank of America and its banking competitors will report third-quarter earnings results in mid-October.

Abbott Agrees to $385 Million Settlement in Baby Formula Case

Abbott Laboratories has agreed to pay $385 million to settle allegations related to its management of a baby formula facility where deadly bacteria was suspected of causing infant deaths, the Justice Department said Monday.

The settlement is a more lenient outcome than some prosecutors had advocated for, believing they had evidence to criminally charge Abbott under a law that has been used to pursue other businesses for selling contaminated foods, the Journal previously reported. But senior Justice Department officials believed criminal charges would have been heavy handed and closed the probe.

They opted instead for the civil settlement, which claws back money the company earned from selling formula through federally funded nutrition programs.

Expected Major Events for Tuesday 00:00/SKA: Aug Revised trade data

01:30/CHN: Aug House Price Index

02:00/CHN: Aug Industrial Output

02:00/CHN: Aug Retail sales

02:00/CHN: Aug Fixed Assets Investment

03:00/SKA: Jul Money Supply index L

04:30/JPN: Jul Tertiary Industry Index

04:30/JPN: Jul Revised Retail Sales

08:00/HK: Aug Hong Kong port container throughput monthly estimates

09:59/PHI: Jul Overseas Filipino Workers Remittances figures

21:00/NZ: 3Q Westpac McDermott Miller Consumer Confidence Index

22:45/NZ: 2Q Balance of Payments

22:45/NZ: 2Q International Investment Position

23:50/JPN: Aug Provisional Trade Statistics for the Month

23:50/JPN: Jul Orders Received for Machinery

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