Stocks fall, oil prices rise as global bonds back under pressure
Stock markets mostly fell and oil prices climbed on Thursday as inflation fears, driven by a lack of progress in ending the Middle East war, drove a further sell-off in global bonds.
Investors were also on edge ahead of a high-stakes summit between US President Donald Trump and Chinese leader Xi Jinping at the White House.
The benchmark US 10-year Treasury yield rose to its highest level since 2007 before later dipping, and the 30-year yield reached its highest since 2004.
Japan’s 10-year yield jumped to a 30-year high during Asia trading hours.
“Bond yields are blowing out again partly because the US economy is booming,” said Neil Wilson, investor strategist at Saxo UK.
Strong US business activity data on Wednesday “played into the narrative of resilient growth, which in turn would enable the Fed to keep hiking rates to deal with inflation”, said Deutsche Bank’s Jim Reid.
A rebound in oil prices also rekindled inflation fears.
Trade Nation analyst David Morrison noted that market expectations for another 25-basis point rate hike by the US Federal Reserve next month had now risen to around 75 percent, up from 55 percent last week.
“It is rare to get movements this volatile in sovereign bond markets, which is another sign that sovereign debt is going through an uncomfortable adjustment period,” said Kathleen Brooks, research director at XTB.
She pointed to a combination of rising governing debt loads and deficits, resilient economic growth and rising inflation risks.
“These things together are anathema to the bond market and it is no surprise that yields are rising,” she said.
Wall Street’s main indices opened lower, with the tech-heavy Nasdaq shedding 0.8 percent after hitting record highs earlier this week.
European stocks were mixed, with London’s FTSE 100 edging higher as oil heavyweights BP and Shell both gained more than one percent.
The Brent international crude benchmark was up two percent, remaining above $100 a barrel, as uncertainty swirled around the seven-month Middle East conflict.
The gains came a day after world leaders at the UN General Assembly offered little to suggest progress in ending the turmoil in the Middle East.
Hopes for a deal to get Gulf oil and gas flowing freely through the Strait of Hormuz as global leaders gathered in New York had sent oil prices down in recent sessions.
Trump and Xi will meet at the White House on Thursday, where thorny discussion topics are expected to include trade, technological competition — particularly in AI — and Beijing’s diplomatic and economic support for Tehran.
