NEW YORK/LONDON – US government borrowing costs advanced for a sixth week on Monday on bets that higher interest rates were on the way and global energy shares rose as crude oil prices hit three-year highs of almost $80 a barrel.

Stocks also benefited from an easing in Sino-US tensions, while there was some relief that Germany's election outcome had ruled out a pure left-wing coalition government.

Instead, a coalition of the center-left Social Democrats with the Greens and the liberal FDP looks likely.

The Dow Jones Industrial Average rose 166.16 points, or 0.48 percent, to 34,964.16, the S&P 500 lost 16.31 points, or 0.37 percent, to 4,439.17 and the Nasdaq Composite dropped 170.78 points, or 1.13 percent, to 14,876.92.

The pan-European STOXX 600 index lost 0.27 percent and MSCI's gauge of stocks across the globe shed 0.35 percent.

The oil price surge is stoking speculation that global inflation will prove longer-lasting than anticipated, forcing central banks to act and benefiting so-called reflation investments, which benefit as rates rise.

"All in all, it's a positive story as we have a strong economic macro story underpinning everything," said Fahad Kamal, CIO at Kleinwort Hambros in London.

Kamal noted that optimism was reflected in central banks signaling their intent to remove pandemic-era stimulus gradually, which in turn was lifting bond yields.

Oil futures have climbed around $9 a barrel over September. 

US crude recently rose 2.12 percent to $75.55 per barrel and Brent was at $79.71, up 2.07 percent on the day.

Coming on top of this year's 300 percent surge in European gas prices, the price rises risk further inflaming inflation expectations and hastening the end of super-cheap money.

Goldman Sachs forecast Brent to hit $90 per barrel by year-end, adding "the current global oil supply-demand deficit is larger than we expected, with the recovery in global demand from the Delta impact even faster than our above-consensus forecast."

Investors are therefore repositioning portfolios. US 10-year Treasury bond yields, a key determinant of global capital costs, jumped 9 basis points last week while the industrials-heavy Dow Jones index outperformed the Nasdaq index of tech stocks .

On Monday, US 10-year Treasury yields hit 1.5 percent for the first time since June. Benchmark 10-year notes last fell 9/32 in price to yield 1.4923 percent, from 1.461 percent late on Friday.

German 10-year government borrowing costs overcame an early dip to hit a three-month high of -0.210.     

The stronger rise in US yields, especially on an inflation-adjusted basis, is also lifting the dollar. The dollar index rose 0.194 percent, with the euro down 0.18 percent to $1.1693.

Focus shifts now to US fiscal policy – the House of Representatives is due to vote on a $1 trillion infrastructure bill, while a Sept 30 deadline on funding federal agencies could force the second partial government shutdown in three years.