Budget countdown begins

If you have bonds in your portfolio, you might be feeling jumpy. Last week, US borrowing costs hit their highest level since the financial crisis. The 10-year Treasury yield - which helps set the cost of borrowing around the world - hit 5.2% for the first time in almost two decades, and 30-year yields rose above 5.5%.

Yields rise when bond prices fall, so these moves reflect a nasty sell-off in the market.

This week could prove equally turbulent. Over the weekend, President Donald Trump rejected Iran’s proposal to reopen the Strait of Hormuz, pushing oil prices higher. This has fuelled fears about inflation and higher interest rates, which risks putting further pressure on bond prices.

US inflation data on Wednesday, followed by a labour market report on Friday, will tell us more.

• Refer a friend and you’ll both receive a £100 Amazon.co.uk gift card when they invest £5,000 or more in a qualifying account. T&Cs and exclusions apply. Find out more

Equities hold firm

So it is a nerve-wracking time to hold bonds. But should we be worried about equities too? Maybe not. European equities edged upwards this morning and, after a lacklustre summer, the Nasdaq - which is packed with technology companies - hit a fresh high last week. Investors seem remarkably cool about global conflict, government borrowing, and safety warnings from AI bosses.

A big source of optimism is AI investment. Hyperscalers such as Amazon and Meta, along with companies further down the food chain, are pouring huge sums of money into AI, creating a lucrative chain of spending that is boosting corporate earnings. Anything that disrupts this cycle could cause a significant rupture in markets, but so far it remains intact.

A flurry of corporate news this week could tell us more. Semiconductor giant Micron is due to publish results on Wednesday, providing a useful gauge of demand for AI infrastructure.

At the less high-tech end of the corporate calendar, Greggs and Wetherspoons are also poised to update the market, offering an insight into how British consumers are faring.

• Looking for personalised financial advice? Our advisory service can help you plan for your next step.

Budget clues

The health of the British economy will also be front of mind in Liverpool, where the annual Labour conference is taking place. Chancellor John Healey will address members today, followed by Prime Minister Andy Burnham on Tuesday. Investors will be searching for signs of what the Autumn Budget might hold in exactly a month’s time.

Mr Healey is expected to announce a “new age of industrialisation”, with a £6bn plan for Royal Navy floating docks and a marine research vessel. The tone of the speech is likely to be upbeat, but the surging cost of government borrowing is making the Chancellor’s job harder. The pressure is on to raise taxes or curb spending.

The week will shed more light on how the domestic economy is faring. Second-quarter GDP figures are due out on Wednesday, with growth expected to be confirmed at 0.4%. The housing market will also be in the spotlight when the Bank of England publishes data on mortgage approvals for August on Tuesday. Approvals fell in July, as high mortgage rates weighed on demand.

Housebuilders are feeling more chipper than usual, however, amid government plans to launch a new version of the Help to Buy scheme. Shares in Barratt Redrow, Persimmon, Taylor Wimpey and Vistry all posted double-digit gains in early trading.

Got a burning question you want to ask? Why not drop us a line. Click here to ask your question.

• Read: How to protect your retirement income from inflation
• Read: 7 questions before you take tax-free cash from your pension
• Read: How to invest like a SIPP millionaire

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. There is a risk that the issuers of bonds may not be able to repay the money they have borrowed or make interest payments. When interest rates rise, bonds may fall in value. Rising interest rates may cause the value of your investment to fall. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.