Economy
Global stocks down, US Treasury yields at highest since 2007
Global stocks extended their decline on Tuesday following the previous session’s selloff, while U.S. Treasury yields climbed to their highest level since 2007 as investors worried that oil prices staying above $100 could intensify the energy shock.
U.S. yields have climbed over the past month as investors grapple with rising rate expectations, heavy debt issuance, solid economic growth and worries about the country’s long-term fiscal outlook.
Markets were shifting their focus to the Federal Reserve (Fed), with traders wagering on a quarter-point rate hike and indications that further policy tightening lies ahead, although Fed Chair Kevin Warsh dislikes giving any guidance about the rate path.
MSCI’s main world stocks index fell 0.28% on Tuesday, after dropping 0.65% the day before.
Europe’s STOXX 600 was down 0.89% to 630.30, its lowest level since June 12. The European tech stock index fell 0.40%, after shedding more than 2% the day before.
Nasdaq futures were down 0.44% and S&P 500 futures fell 0.45%.
Taiwan shed 0.77% while Japan’s Nikkei ended flat after swinging between gains and losses.
Oil prices were up, with benchmark Brent crude futures above $107 per barrel as Yemen’s Iran-aligned Houthis launched a new wave of attacks on Saudi Arabia and were digging into positions on the western coast of Yemen along the Red Sea.
“Several weeks ago, there may not have been a strong reason to believe that crude would rally further, but there is now: Iran’s strategic military doctrine has shifted toward pre-emptive attack,” Thierry Wizman, global forex and rates strategist at Macquarie Group, said.
“And the U.S. administration may have no choice but to move back to kinetic war after the midterm elections,” he added.
Central banks in focus
U.S. 10-year Treasury yields hit peaks not seen since 2007 on Tuesday as traders priced in a series of rate increases from the Federal Reserve.
German Bund yields, the euro area’s benchmark, rose to their highest level in over 17 years at 3.56%, as traders boosted bets on European Central Bank (ECB) rate hikes, with a depo rate seen at 3.45% at the end of 2027, from the current 2.50%.
“The market sees a total of nearly four rate hikes (from the Fed) through the end of next year,” John Velis, head of Americas strategy at BNY, said.
“We think that by then the economy won’t be able to handle rates that high for very long, and the Fed will be contemplating dialing back its restrictiveness toward the second half of the year,” he added.
A hawkish repricing of the Fed’s rate path supported the dollar, but some strategists said higher yields were also stoking concerns about a deeper correction in risk assets, prompting investors to seek refuge in the U.S. currency.
The dollar index, which measures the greenback against a basket of currencies, rose 0.15% to 99.65. The European single currency was down 0.1% on the day at $1.1537, while the dollar rose 0.40% against the yen to 154.95 .
The Bank of Japan is widely expected to raise its interest rate by 25 basis points to 1.25% at the end of its two-day meeting on Friday and signal more tightening ahead. Policymakers are seeking to shore up the yen after intervention helped steer the currency away from a 40-year low.
Gold was slightly higher. Spot gold traded at $4,288 per ounce.
In cryptocurrencies, bitcoin fell 2.30% to $77,288.
Türkiye’s central bank governor warned Wednesday that energy shocks could have longer-lasting effects on inflation if cost pressures spill over into wages and prices, saying repeated supply disruptions could make it harder for policymakers to contain price increases.
Central banks could limit the initial impact of energy shocks through timely and restrictive measures, but second-round effects require close monitoring, Central Bank of the Republic of Türkiye (CBRT) Governor Fatih Karahan told a summit in Budapest.
Since the United States and Israel launched attacks on Iran in late February, fears of supply disruption have pushed oil prices sharply higher, with the surge in energy costs feeding into fuel and transport prices and lifting global inflation expectations.
Attacks since late August on military, shipping and energy assets across the Middle East have sent oil prices back above $100 a barrel and revived fears about a wave of price hikes.
That price outlook, coupled with the relentless surge in energy costs, has bolstered market bets for rate hikes by the world’s biggest central banks.
Karahan said central banks are accustomed to economic disruptions, adding that the shocks currently affecting the global economy were lasting longer than in previous periods.
Energy shocks, inflation
The global production structure has changed significantly over the past 20 to 30 years, as companies built extensive supply chains and countries became more economically interdependent, said Karahan, as cited by the Turkish media.
These links need to be properly assessed during periods of change, he noted, particularly as energy-related supply shocks pass through to inflation.
While initial price effects could be contained through policy measures, the process could become more complex if shocks affected wages, pricing behavior and inflation expectations, Karahan said.
He added that successive supply shocks could make inflationary pressures more persistent and increase the need for longer-term policy solutions.
Second-round effects could entrench inflation
Karahan said central banks should focus not only on the initial movement in prices but also on the impact of supply shocks on inflation expectations and pricing behavior.
Well-anchored inflation expectations give central banks greater room to respond to first-round effects, he said. However, controlling the impact becomes more difficult when shocks spread to wages, prices and exchange rates.
The risk is particularly significant for emerging markets, where external shocks can have a stronger impact on exchange rates if inflation expectations are not sufficiently anchored, he said.
Tighter monetary policy may be needed
Karahan said geopolitical tensions in the Middle East were creating upward pressure on energy prices.
A tighter monetary policy stance could be one of the tools used to limit the risk that deterioration in the inflation outlook becomes permanent, he said.
Fiscal policy could also help soften the initial impact of energy shocks on prices, Karahan added, saying monetary and fiscal policies could support each other during such periods.
Gold, dollar demand
Karahan said growing fragmentation in the global economy was affecting central banks’ reserve-management decisions.
Gold has distinct characteristics as a commodity, financial asset and reserve instrument, he said, adding that central banks had recently increased their focus on gold.
However, this did not mean that the dollar’s dominant position in the international monetary system would change rapidly, Karahan said.
The dollar’s deep and highly liquid markets continued to support its position in the global reserve system, he added.
Geopolitical risks, financial pressures and uncertainty over market access were also influencing reserve preferences, while central banks’ demand for gold remained strong, Karahan said.
Reserve management
Reserve management has traditionally been based on three factors – security, liquidity and return – but access should now be added to that framework, Karahan said.
Some reserve assets considered liquid under normal conditions may not be equally accessible during periods of market stress, he noted.
As a result, the total size of reserves is not the only relevant measure. Their practical usability when needed is also important, he said.
Rising gold prices
Karahan said gold had long played an important role in Türkiye’s financial system and remained one of the main savings instruments for households.
A significant amount of gold is held physically outside the financial system, while gold deposits also represent an important part of the banking system, he said.
The central bank supports balance in the gold market through reserve requirements, swap transactions and other measures, Karahan added.
Higher gold prices can increase the value of reserves and gold’s share of total reserves, but this does not mean that available liquidity rises by the same amount, he said.
“The more important question is not how much we have, but how much of what we have we can use, particularly under stress scenarios,” Karahan said.
Karahan said global economic integration had boosted efficiency and created disinflationary effects for many years.
However, as economic ties increasingly became part of geopolitical competition, policymakers could no longer assume that the conditions of the previous period would continue unchanged, he said.
Annual inflation in the U.K. accelerated in August as the conflict in the Middle East continued to pose upward pressure on fuel prices, official data showed Wednesday.
The consumer price index (CPI) rose 3.1% in the 12 months to August, up from 2.9% the previous month, the Office for National Statistics (ONS) said.
Higher inflation adds pressure on Prime Minister Andy Burnham and Treasury chief John Healey to ease the cost of living for households ahead of the Labour government’s budget update next month.
The Bank of England (BoE) is forecast to maintain its benchmark interest rate at 3.75% on Thursday as the U.K. economy struggles for growth.
To tackle persistently high consumer prices, the U.S. Federal Reserve (Fed) is expected to lift borrowing costs on Wednesday, following a similar move by the European Central Bank (ECB) last week.
With central bank interest rates on the rise – and government bond yields reaching multidecade highs in recent weeks – Healey has pledged to maintain strict fiscal discipline.
But he has not been drawn on whether this means his budget on Oct. 28 will include new tax rises.
Analysts expect inflation to rise toward the end of the year as higher energy costs feed through to bills further, with little sign of a deal to end the Middle East war.
“With the situation in the Middle East looking increasingly fraught, the expectation is that inflation will continue to climb higher until the end of the year at a minimum,” said Richard Carter, head of fixed interest research at Quilter Cheviot.
“For the government, today’s figures are a kick in the teeth for an administration that wants to make easing the cost of living its central mission,” he added.
Diesel prices in Türkiye reached a record high of just under $2 per liter Tuesday, as the war in the Middle East tightens fuel supplies and Ukrainian strikes target Russian refineries.
Currency volatility and increases in the special consumption tax are also putting pressure on fuel prices.
The latest TL 6.5 hike Tuesday pushed diesel prices above TL 95 per liter ($1.87) in Istanbul. Prices reached as high as TL 96.75 in the capital Ankara and TL 97.02 in Türkiye’s third-largest city, Izmir.
Diesel had been selling for around TL 54.40 per liter in September 2025, meaning prices have risen by approximately 76% over the past year.
Prices are now almost 60% higher than they were before the U.S. and Israel attacked Iran in late February, when they stood at around TL 60.30 per liter.
Prices at the pump for diesel and regular gasoline closely follow those of crude oil. And oil has renewed its rise recently.
Last week, both Brent, the international standard, and U.S. crude surpassed $100 a barrel for the first time in months as fighting between the U.S. and Iran escalated again.
Brent crude futures were up 6 cents at $105.74 a barrel at 1301 GMT Tuesday after hitting a session high of $108.43. U.S. West Texas Intermediate futures were up 27 cents at $101.66 a barrel after rising as far as $104.21 earlier.
Türkiye had removed a special consumption tax on diesel until the end of August and reinstated it this month. The tax will rise incrementally by TL 3 each month until it reaches about TL 13.1 per litre on Jan. 1, the same level as before the removal.
Authorities last month also removed diesel from Türkiye’s sliding-scale tax adjustment system, implemented to limit the impact of rising oil prices and inflation on consumers.
Gasoline and liquefied petroleum gas (LPG) will remain in the system until Oct. 1, when the system is set to be abolished.
Media reports, citing industry sources, said diesel prices could rise by a further TL 2.5 to TL 3 per liter as soon as Wednesday unless additional measures are taken.
The expected increase would push at least one fuel product above the TL 100 threshold for the first time.
Diesel prices are expected to exceed TL 100 in 45 provinces following the potential increase, while prices in major cities such as Istanbul, Ankara and Izmir could approach TL 98 per liter.
Higher diesel prices mean more expensive transportation for a long list of everyday goods. That’s because diesel is used for many freight and delivery networks, which could see businesses pass along steeper costs to consumers.
UniCredit CEO Andrea Orcel is apparently pushing for a clean sweep as the Italian lender moves toward taking over Commerzbank, with a report saying Tuesday he wants Bettina Orlopp out as CEO and opposes Berlin holding on to two supervisory board seats.
UniCredit also wants Commerzbank Chair Jens Weidmann to leave, Reuters reported, citing sources with knowledge of the matter.
German Finance Minister Lars Klingbeil and Orcel met Monday on the Italian bank’s takeover plans, a turning point in the two-year battle for control of one of Germany’s biggest banks after Berlin failed in its attempt to stymie a takeover. Both called the meeting “constructive.”
UniCredit did not respond to a request for comment.
A spokesperson for Commerzbank dismissed any changes in management, saying “The board of Commerzbank AG has running contracts, the supervisory board is elected by the general assembly, and there’s full alignment on strategy.”
Germany’s Finance Ministry declined to comment further, after saying Monday it wants to keep two board seats.
It was unclear if the leadership roles or UniCredit’s opposition to the German government maintaining two board seats were discussed at Monday’s meeting in Berlin.
“We are currently represented on Commerzbank’s supervisory board and will continue to be,” Klingbeil told reporters Tuesday, adding: “And, naturally, if and when the time comes, we also expect to be represented on UniCredit’s board.”
New shareholder representatives
Orlopp said last month she was not feeling pressure to give up her role after the months-long ownership battle over Germany’s second-largest bank, which both the Commerzbank CEO and Weidmann have said should remain independent.
Orcel repeatedly said over the summer he wanted to engage with Commerzbank employee representatives, local authorities and central government, leaving out Orlopp and Weidmann.
UniCredit is in a position to call an extraordinary shareholder meeting and appoint new shareholder representatives at Commerzbank, he said.
Germany won the right to appoint two board members when it rescued Commerzbank in 2009 during the global financial crisis.
It retains a stake of 13.3% and it is not clear how UniCredit could block Berlin from retaining two members while it remains a shareholder.
In addition to the board seats, Berlin has set out a number of other demands relating to a UniCredit takeover, including Commerzbank remaining listed on the stock exchange, keeping its base in Frankfurt and continuing to finance German medium-sized companies at home and abroad.
After months of resistance, German government officials and Commerzbank executives softened their stance on a potential deal after UniCredit amassed a stake of nearly 50%.
Now German officials are hoping to protect jobs as well as the brand of a bank that plays a critical role in financing the medium-sized companies in Europe’s largest economy, whose government is in the throes of a political crisis.
A combination of UniCredit and Commerzbank would create a bank with more than 1.3 trillion euros ($1.5 trillion) in assets across two of the eurozone’s largest economies.
The Trump administration is redirecting tens of millions of dollars in U.S. military assistance away from countries in Europe and the Middle East, steering the funds toward conservative-led governments in Central and South America as Washington reshapes its foreign aid priorities.
The State Department on Tuesday notified Congress that it will reprogram $52 million in foreign military financing from Slovakia, North Macedonia, Tunisia and Iraq to Panama, Peru, Ecuador and Colombia.
Secretary of State Marco Rubio visited Colombia, Ecuador and Peru last week and pledged them additional support as the Trump administration has prioritized the Western Hemisphere in its foreign policy with an emphasis on combating drug trafficking and illegal immigration.
Foreign military financing provides recipient countries with U.S. taxpayer dollars to allow them to purchase military equipment from American defense contractors.
Türkiye launched an operation across 22 provinces Tuesday against fresh produce distributors suspected of manipulating vegetable and fruit prices and making illicit profits, with detention warrants issued for 41 company executives.
The Istanbul Chief Public Prosecutor’s Office said 109 workplaces and residences were being searched simultaneously as part of the investigation into pricing in the fresh produce distribution market.
The suspects are accused of showing product supply as lower than it actually was and costs as higher than their real levels, allegedly creating inflated costs through forged producer receipts and manipulating fresh fruit and vegetable prices upward.
Justice Minister Akın Gürlek said the investigation was examining the “price journey of products from the field to the market.”
Authorities obtained data from the Trade Ministry’s Hall Registration System and the Agriculture and Forestry Ministry’s Farmer Registration System, while the Tax Inspection Board under the Treasury and Finance Ministry prepared a comprehensive report, Gürlek said on the social media platform X.
The government is “resolutely continuing our fight against crimes that disrupt the economic order and generate unjust profits through price manipulation, while protecting the labor of our producers, the budgets of our citizens and the fair functioning of the market,” the minister wrote.
As part of the probe, officials took statements from around 1,029 farmers to determine the prices at which products left producers and the conditions under which they reached suppliers.
The investigation found indications that some major suppliers operating in wholesale markets had used their market dominance to report product supply below actual levels and costs above their real levels, Gürlek said.
The companies allegedly created false costs by issuing forged producer receipts and used these methods to manipulate fresh produce prices upward and make illicit profits.
The investigation is being conducted under charges including influencing prices, violating the Tax Procedure Law, forgery of documents and laundering assets derived from crime.
“We will not allow any stage of the chain – from the field to the table – to be turned into a source of unjust profit at the expense of our producers’ labor and our citizens’ budgets,” said Gürlek.
The annual consumer price index (CPI) in Türkiye maintained a downward trend in August and eased to 31.5%, from 31.8% a month ago, while monthly inflation was 1.84%.
Despite energy and education pushing headline inflation higher, growth in food prices was relatively benign.
Annual food inflation cooled to 33.79% last month, down from 37.53% in July, according to official data. Monthly food inflation came in at 0.22%.
The slow monthly increase in food prices was largely driven by a 2% decline in unprocessed food prices, particularly fresh fruits and vegetables.
Despite the cooling monthly trajectory, food remains the largest single contributor to the annual CPI figure.
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