Growth Holds Firm, Bond Yields Push Higher

For the week ending 25 September 2026

As of midday Friday, global equities were broadly flat on the week, pressured by a sharp rise in US Treasury yields and oil price volatility. The US 10-year Treasury yield surged more than 20 basis points mid-week, breaching 5%, and the 30-year Treasury yield hit highs last seen in 2004 as stronger-than-expected US flash PMI data showed elevated activity, growing backlogs, and labor tightness, reinforcing expectations for further Fed tightening. The price of a barrel of Brent Crude oil rose above $106 on Iranian threats to extend the conflict before easing slightly on Friday following reports that US and Iranian negotiators are exploring a phased deal to reopen Strait of Hormuz. Volatility, as measured by futures contracts on the CBOE Volatility Index (VIX), rose to 15.7 from 14.8 a week ago.

MACRO NEWS

Global flash PMIs signal economic strength, rising price pressures

September’s flash PMIs delivered a broadly resilient but uneven growth signal across developed markets. The US led, with the Composite PMI surging to a five-year high of 58.4, as services and manufacturing both beat expectations — though input prices hit their highest since October 2022. The eurozone surprised to the upside, with the Composite rising to a 41-month high of 53.1 (consensus: 51.7), driven by Germany and France, even as energy-driven price pressures built. The UK lagged, with the Composite slipping to a three-month low of 51.7 amid softening services and contracting new orders. Overall, growth remains resilient, but re-accelerating inflation — particularly energy-driven — is applying pressure on central banks to raise rates.

US–China trade truce extended

The Trump–Xi summit in Washington concluded with a two-month extension of the US–China trade truce through January 10, 2027, averting a near-term escalation in tariffs. Both leaders struck a cooperative tone, with Xi calling for partnership rather than rivalry, but meaningful progress on several key issues remained limited. On AI, Trump remained steadfast that guardrails are not needed, while Xi expressed some openness to the idea. Other key agenda items, including rare earth access, Taiwan, and the Iran conflict, remain unresolved.

Fed speakers strike a hawkish tone

Fed officials this week delivered a broadly hawkish message, with seven policymakers — Musalem, Barkin, Collins, Barr, Williams, Hammack, and Paulson — either endorsing last week’s rate hike to 3.75%–4.00% or signaling further tightening may be needed. Williams called another hike by year-end “reasonable,” pushing market-implied odds of an October move to ~75%. Hammack cited an “extended sequence of shocks” keeping upside inflation risks elevated, while Paulson said September inflation data “clinched” her vote and that modest additional tightening may be warranted. The Fed’s communications this week have reinforced a higher-for-longer rate path, with markets now pricing one and a half additional hikes before year end.

Highlights from the UN General Assembly

The 2026 UN General Assembly was dominated by the US–Iran conflict. President Trump defended the now seven-month-old war but surprised markets by revealing back-channel talks with Iranian mediators even as Iran’s president vowed defiance. Ukraine’s Zelenskyy pressed allies to tighten the economic squeeze on Russia. On artificial intelligence, OpenAI’s Sam Altman and Anthropic’s Dario Amodei made an unprecedented joint appearance before the UN Security Council, urging global cooperation on AI safety standards.

QUICK HITS

Meta surged 11% on September 21 amid signs of strong early adoption for its new “Muse” AI agent, helping fuel a broader tech rally. Muse has surpassed 900,000 downloads in its first six days, and Meta’s stock has gained about 33% this month, putting September on pace to be its best month since 2013.

Australia’s August 2026 labor force report showed employment surging by 39,500 — nearly double consensus expectations — yet the unemployment rate ticked up to 4.6% as a jump in labor force participation brought more job seekers into the market. The mixed data weighed on the Australian dollar and adds complexity to the Reserve Bank of Australia’s upcoming rate decision, with markets trimming hike expectations even as the strong headline job creation signals underlying labor market resilience.

Norway’s Norges Bank has raised its deposit rate by 25 basis points to 4.50%. The bank also signaled that it is prepared to raise rates further if needed to return inflation to its 2% target and that the rate will likely remain elevated for some time.

The Riksbank (Sweden) held its policy rate steady at 1.75%, in line with expectations, but accompanied the decision with a hawkish tone — signaling that rate increases are expected to begin this year and revising its rate path upward.

The Swiss National Bank held its policy rate unchanged at 0.00% while dialing back prior language about willingness to intervene in the franc. President Schlegel emphasized a meeting-by-meeting approach moving forward.

The OECD raised its 2027 inflation projections for every G20 economy except China and Saudi Arabia, citing renewed energy price shocks, and said monetary policy globally — including in the US and Australia — may need to tighten further.

The University of Michigan’s final September consumer sentiment index fell to 48.1 — a four-month low and down from 51.7 in August — as Americans grow increasingly concerned about rising prices, with one-year inflation expectations jumping to 4.6% from 4.0%.

THE WEEK AHEAD

Monday: US September Dallas Fed manufacturing activity; China August industrial profits

Tuesday: US Conference Board consumer confidence report, US JOLTS August labor report; Chinese PMIs; Australian CPI

Wednesday: US September ADP report, US August PCE report

Thursday: Eurozone unemployment rate; US ISM manufacturing PMI; Tokyo CPI

Friday: US September nonfarm payrolls report; eurozone September CPI