Weekly Market Update: 4th Sept
04/09/2026
Rachel Winter discusses rising government bond yields, the pressure on US oil refining capacity, and Shein’s IPO.
Transcript
Good morning and welcome to the Killik & Co market update.
Bond yields have continued to dominate the headlines this week – we have continued to see rises in bond yields, which essentially means that investors are demanding a higher level of return – or interest – in order to lend money to various governments around the world.
Here are the yields on 10-year government bonds for different governments, and how these yields have changed over the last 12 months.
The UK is at the top there in pink. The UK government is currently having to pay over 5% per year on any newly issued 10 year government bonds. This could indicate a few things – one, that investors feel a little uncomfortable with the level of debt that the UK government already has – many are likely waiting for the autumn budget to get a sense of how the new prime minister will address this and the extent to which he might add to it further. Investors are also likely a bit mindful of UK inflation – holding an investment with a fixed rate of annual return, like a bond, becomes relatively less attractive if inflation is expected to rise.
German government bonds, shown by the purple line, have always been relatively low because the German government has a relatively low level of debt compared to other countries – investors view the German government as relatively safe and therefore happy to accept a lower rate of return to lend it money.
That said, you can see that yields are on the up across the board, because overall levels of government debt are rising, as are inflation expectations.
We sometimes look at the CNN fear and greed index to gauge how investors are feeling. The index measures several factors, such as market momentum and demand for safe haven assets to assess whether the prevailing mood is greedy or fearful. A low reading demonstrates a higher level of fear – you can see that all this talk of rising bond yields has caused fearfulness recently.
That said, the equity market continues to be resilient. Here’s the MSCI World. It has been flatlining somewhat over the last few weeks but it hasn’t dropped significantly. The prevailing view is that investors are concerned about bond markets but very positive about the increases in efficiency that AI will bring, and that positively is propping up the equity market.
Tension in the middle east is showing no signs of abating, and energy prices are firmly back on the agenda as we head towards the US midterm elections – for which a lower inflation rate would be preferable – and also towards the winter months – when more fuel is needed.
Here’s the brent crude price – on its way back up to that $100 per barrel mark.
The price of US diesel is also high at the moment – as shown by this 20 year chart. This is very important input into the economy – it powers cars, heavy duty vehicles such as lorries and buses, ships, as well as construction and agricultural machinery.
US diesel has to be refined from crude oil. The US is reportedly trying to find more refining capacity at the moment to try and increase the supply of diesel. This chat shows the percentage of US refining capacity in use going back to the 1990s.
If we zoom in and just look at the last few months we can see that refining utilisation has increased from 90% to 98% since May. A lot of the refining capacity in the Middle East has been taken out of action due to the war, which is putting more pressure on US refiners.
Gas prices are also in focus at the moment too, especially in Europe. Here’s the Dutch TTF price, the European benchmark.
Gas storage facilities across Europe are currently not as full as they should be. They should generally be around 80% full at this point in the year, as they typically fill up through the summer and then deplete through the winter. At present they are only about 65% full. Energy companies have been reluctant to top up the storage facilities with price at such high levels, but prices are unlikely to come down while the tension in the middle east continues.
And lastly, shares in the Chinese fashion company, shein, listed on the hong kong stock exchange on Monday this week.
The company initially considered listing in the US and also London, but these plans fell through for various reasons, including concerns about the company’s ties to the Chinese government and also due to accusations of forced labour in the company’s supply chains.
The shares have not performed well so far, as you can see by this chart which shows the first four days of trading. The IPO price was just above 48 hong kong dollars, but the price has declined to 38 dollars this week. there was a time when shein was worth $100bn dollars, but the current market capitalisation is around a quarter of this. despite this, if Shein had listed in London, it would be large enough to go into the FTSE 100.
Next week – Inditex.
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