Global markets were treading water on Monday as investors confronted a fresh combination of geopolitical risk, trade friction and stubbornly high borrowing costs, with little appetite to make large bets ahead of further developments in Washington.
The latest pressure point is Iran, where the prospect of tougher US sanctions has kept energy traders focused on the threat of further disruption to oil supplies. Brent crude was hovering around $93 a barrel after retreating from last week’s gains, with investors awaiting details of Washington’s next move.
The oil market’s relative calm belies the risks. Any further deterioration around the Strait of Hormuz could tighten supplies and reignite the inflationary shock that has already complicated central banks’ attempts to bring price pressures under control.
That leaves bond markets particularly exposed. Long-dated US Treasury yields remain elevated, increasing borrowing costs across the economy and challenging the assumption that inflation and interest rates are on a straightforward path lower. The 30-year Treasury yield has been trading around levels last seen in the late 2000s, reinforcing concerns over the cost of financing government debt.
The geopolitical risks are not confined to the Middle East.
US-Canada trade relations have deteriorated sharply after negotiations collapsed, with Washington imposing tariffs on Canadian goods and Ottawa preparing retaliatory measures. The breakdown has revived fears that tariffs will feed directly into consumer prices while simultaneously weighing on trade and investment.
For investors, the combination creates an uncomfortable macroeconomic equation: higher energy costs, greater trade barriers and expensive government borrowing all threaten to squeeze growth while keeping inflation elevated.
Against that backdrop, Shein’s forthcoming Hong Kong flotation offers another measure of how sharply investor expectations have changed.
The fast-fashion group is seeking a valuation of up to $27bn in its September 1 listing, almost three-quarters below the more than $100bn valuation it achieved at its 2022 peak. The company plans to raise as much as $1.8bn, after previous attempts to list in New York and London were derailed by regulatory and political scrutiny.
The markdown reflects a tougher environment for Shein’s ultra-low-cost model. Tariffs on small packages, increased regulatory scrutiny, competition from Temu and changing consumer behaviour have all raised questions over whether the growth engine that propelled the company to global prominence can continue at the same speed.
The broader message from markets is less dramatic than a full-blown sell-off, but arguably more significant: investors are becoming increasingly unwilling to look through a growing list of risks.
Oil remains high. Trade barriers are rising. Bond yields are elevated. And companies once valued on the assumption of relentless growth are being forced to confront a much less forgiving capital market.
For now, markets are holding their nerve.
The question is how long they can continue to do so if the pressure points keep multiplying.
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