Investment Daily: Global stocks and bonds fell ahead of the Fed rate decision

16 September 2026

US stocks extended losses on Tuesday amid higher oil prices and Treasury yields ahead of today’s Fed policy decision. The S&P 500 lost 0.4%   

US Treasuries edged lower as higher oil prices reinforced inflation concerns. 10-year yields ended 1bp higher at 5.00%.

European stocks fell on Tuesday, ahead of the Fed rate decision. The Euro Stoxx 50 fell 0.4%. The German DAX lost 0.2% and the French CAC 40 was down 0.3%. In the UK, the FTSE 100 ended 0.4% lower.

European government bonds fell. 10-year German bund yields rose 2bp to 3.55% and 10-year French bond yields climbed 3bp to 4.50%. In the UK, 10-year gilt yields ended 2bp higher at 5.39%.

Asian stock markets fell on Tuesday, as higher oil prices and bond yields continued to weigh on market sentiment ahead of expected monetary tightening in the US and Japan. Japan’s Nikkei 225 ended almost flat, and Korea’s Kospi fell 0.9%. Elsewhere, Hong Kong’s Hang Seng dropped 1.0% while China’s Shanghai Composite was down 0.5%, after mixed August Chinese activity data. India’s Sensex ended 1.0% lower as ASEAN markets broadly declined.

Crude oil prices rose further on Tuesday. WTI for October delivery settled 4.4% higher at USD105.8 a barrel. 

The Bank of Japan (BoJ) raised its policy rate by 25bp to 1.00%, as widely expected, and decided to halt the reduction in JGB purchases from April 2027. The BoJ highlighted the risk of underlying CPI inflation deviating upward above 2%.

The Reserve Bank of Australia (RBA) kept its policy rate unchanged at 4.35%, as widely anticipated. Governor Bullock noted upside risks to inflation and did not rule out further tightening.

In China, May activity indicators continued to reflect a two-speed economy. Industrial production showed resilience, up 4.5% YOY, driven mainly by gains in high-tech manufacturing and new energy sectors thanks to robust exports. However, non-tech domestic demand was softer than expected as the property sector remained under pressure. Retail sales fell 0.6% YOY, partly reflecting an unfavourable base effect from last year’s trade-in subsidies. Fixed asset investment contracted by 4.1% YOY in the first five months, despite strong advanced manufacturing investment.

In the US, the Federal Reserve (Fed) is expected to hike the Fed funds rate for the first time in three years to tackle stubborn inflation, which remains above the 2.0% target and is being driven by rising energy costs amid prolonged geopolitical tensions. Retail sales likely rebounded in August on higher energy prices, but real consumer spending is likely to ease in Q3 after Q2's strength.

Brazil’s central bank may cut its policy rate by another 25bp, but sticky services inflation suggests limited room for further easing through the rest of 2026.

In the UK, higher oil prices should lift headline CPI inflation. Core services inflation has softened recently, in line with subdued wage growth.