Oil prices jumped, US bond yields rallied and equities retreated Tuesday as the Federal Reserve looked set to raise interest rates, with high inflation and AI concerns dominating market sentiment.
Brent crude futures again pushed towards $110 a barrel, while average diesel prices in the United States struck a record high of just under $6.27 a gallon, heaping pressure on President Donald Trump ahead of midterm congressional elections.
"There's no let-up in the volatility rippling through financial markets, with energy prices staying painfully elevated and worries swirling about the knock-on effect for inflation and interest rates," said Susannah Streeter, chief investment strategist at Wealth Club.
The yield on the 10-year US Treasury note hit 5.04 percent, a level last seen in 2007, as investors price a likely hike in US interest rates.
The US Federal Reserve begins a rate-setting meeting Tuesday with markets expecting policymakers to pull the trigger on a hike to tackle persistently high consumer prices in the world's biggest economy.
Market expectations for a 25-basis-point rate increase have surged after official data published last week showed US annual inflation remaining far above the Fed's target.
With the crisis in the Middle East showing few signs of abating and Yemen's Houthi rebels taking control of a crucial outlet for shipping, crude has spiked this month to more than $100 a barrel.
The surge in energy costs has ramped up pressure on central banks to raise borrowing costs.
The European Central Bank last week lifted interest rates in the eurozone, though the Bank of England is forecast to maintain its benchmark cost on Thursday as the UK economy struggles for growth.
Wall Street stocks moved lower at the start of trading on Tuesday, following losses in Europe and Asia.
There was renewed weakness for technology stocks after executives driving the AI sector said advances in artificial intelligence should be slowed.
"It looks as if investors are happier reducing some risk now, rather than leaving all their chips on the table, and mostly on the chip sector," said Trade Nation analyst David Morrison.
Trump on Monday dismissed fears that artificial intelligence could wipe out humanity, repeatedly calling them a hoax and rejecting global calls to put guardrails around the fast-moving technology.
Anthropic chief Dario Amodei, whose company makes the popular Claude AI system, opened the floodgates on Saturday when he called for the sector to slow down.
His comments were echoed by OpenAI's Sam Altman and SpaceXAI's Elon Musk.
Microsoft on Monday published a "humanist AI code of conduct" as the concerns grew.
"AI should not exceed human control. Models should remain subordinate to humanity," read one part.
Brent North Sea Crude: UP 1.1 percent at $106.87 per barrel
West Texas Intermediate: UP 1.3 percent at $102.75 per barrel
New York - Dow: DOWN 0.3 percent at 52,250.62 points
New York - S&P 500: DOWN 0.1 percent at 7,611.00
New York - Nasdaq Composite: DOWN 0.2 percent at 26,146.82
London - FTSE 100: DOWN 0.3 percent at 10,666.72
Paris - CAC 40: DOWN 0.2 percent at 8,100.74
Frankfurt - DAX: UP 0.6 percent at 25,455.67
Tokyo - Nikkei 225: FLAT at 63,484.10 (close)
Hong Kong - Hang Seng Index: DOWN 1.0 percent at 24,667.24 (close)
Shanghai - Composite: DOWN 0.5 percent at 3,864.28 (close)
Euro/dollar: DOWN at $1.1542 from $1.1547 on Monday
Pound/dollar: DOWN at $1.3482 from $1.3500
Euro/pound: UP at 85.61 pence from 85.53 pence
Dollar/yen: UP at 155.09 yen from 154.34 yen
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