MPC Markets Morning Call — 2nd October 2026: Bonds Run the Show — Yields Hit 2002 Highs Before Late Rally Rescues Wall Street

The global bond rout dominated overnight trade once again. The US 10-year Treasury yield spiked to 5.34% — its highest level since 2002 — after the ISM manufacturing prices index surged to 77.9, near its March peak at the onset of the Iran conflict. Germany’s 10-year topped 3.6% (highest since 2008), France’s hit a 2002 high near 4.96%, and the UK 30-year gilt briefly breached 6% for the first time since 1998. Japan’s 10-year traded at 3.13%, its highest since the mid-1990s. The dollar hit a 17-month high against the euro on rate differentials, while the IMF stated global bond markets were still “functioning as they should” despite the selloff.

But the selloff reversed sharply after Fed Vice Chair Philip Jefferson said it may take more time to judge whether further rate hikes are needed, echoing New York Fed President Williams’ “no urgency” line from earlier in the week. The 10-year snapped back to close at 5.24%, down 6 basis points on the day, while the 2-year fell 10bp in its biggest daily drop since August 2025. CME FedWatch odds of an October hike collapsed from 69% a week ago to below 28%.

Brent crude jumped 4.3% to $102.24 as escalation signals intensified on multiple fronts. The Wall Street Journal reported the USS Theodore Roosevelt carrier strike group, Marine Corps ships and up to 10,000 additional troops are heading to the Middle East by end-November — and that President Trump has told aides he expects to resume strikes on Iran after the midterm elections. Iran warned it was planning a “forceful response” if US attacks resume, even as its foreign minister privately suggested Tehran might restore nuclear inspectors’ access in exchange for sanctions relief. At least three tankers came under attack this week attempting to transit the Strait of Hormuz.

Adding fuel to the fire, Chinese refiners suspended all oil-product exports beyond Hong Kong and Macau until further notice, with PetroChina cancelling October gasoline and jet fuel shipments. Asia’s gasoline crack spread hit a record $50.53 per barrel over Brent. A global diesel shortage driven by the Iran and Ukraine wars is unlikely to ease before next year, with US diesel averaging $6.40 per gallon.

Accenture surged 16% after posting record large-deal bookings, a 5% dividend lift and 3–6% FY27 revenue growth guidance that eased fears about AI disrupting the IT services sector. The rally lifted Cognizant (+6%), IBM (+2.6%), Salesforce (+3.1%) and ServiceNow (+2.8%). Micron added 3% as its blowout Q1 guidance and $32 billion in customer supply commitments reinforced confidence in the AI demand cycle, taking its year-to-date gain to nearly 280%.

The ASX 200 fell 2.0% to 8,614 — its lowest close since 10 June — with all 11 sectors finishing in the red and close to 90% of constituents declining. Energy led the losses (−3.0%) despite firm oil, followed by staples (−2.6%), health care (−2.5%) and real estate (−2.5%). Financials shed 2.1% as the RBA’s Financial Stability Review warned global bond markets could turn “disorderly.”

In corporate news, Lynas Rare Earths fell 8.6% after agreeing to acquire Meteoric Resources (+47%) in an all-scrip deal valuing it at ~$968 million — a 68% premium that lifts Lynas’ resource base by 79% but brings a US$498 million capex bill. Data#3 jumped 13.7% on an upgraded first-half outlook, while Liontown slumped 15% after a Macquarie downgrade. SPI futures point to a 0.5% bounce at the open (+44 points to 8,677).