London (AFP) – 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, 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. 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.
Oil prices shot up around four percent, rekindling inflation fears. International benchmark contract Brent crude topped $107 per barrel, as uncertainty swirled around the seven-month Middle East conflict. IG analyst Chris Beauchamp said it unnerves equity markets when oil prices jump higher without obvious headlines about attacks on pipelines or ships. “When prices move for no obvious reason it is a sign that traders are pricing in different outcomes,” he said. “In this case, it looks like an expectation of a further tightening of the supply situation.”
Beauchamp said traders appeared racing to boost exposure to rising oil prices. “Such momentum can become self-sustaining unless the US and Iran can make some progress, and soon,” he said. 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.
Wall Street’s main indices were lower in late morning trading, with the tech-heavy Nasdaq shedding 0.8 percent after hitting record highs earlier this week. European stocks ended the day lower. Investors were also keeping an eye on a meeting between Trump and Xi 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.
US Treasury Secretary Scott Bessent announced Wednesday that the rival superpowers had agreed to extend a trade truce by two months, into January 2027. “This extension was shorter than had been floated by US officials beforehand, but does offer more time to potentially reach a longer deal,” Reid said.
– Key figures at around 1530 GMT –
Brent North Sea Crude: UP 4.0 percent at $107.24 per barrel
West Texas Intermediate: UP 4.1 percent at $95.90 per barrel
New York – Dow: DOWN 0.7 percent at 51,159.25 points
New York – S&P 500: DOWN 0.5 percent at 7,666.22
New York – Nasdaq Composite: DOWN 0.8 percent at 26,717.24
London – FTSE 100: DOWN 0.2 at 10,679.99 (close)
Paris – CAC 40: DOWN 0.5 percent at 8,084.70 (close)
Frankfurt – DAX: DOWN 0.6 percent at 25,266.53 (close)
Hong Kong – Hang Seng Index: DOWN 0.3 percent at 24,761.13 (close)
Shanghai – Composite: DOWN 1.2 percent at 3,888.37 (close)
Tokyo – Nikkei 225: UP 0.8 percent at 65,513.99 (close)
Euro/dollar: DOWN at $1.1369 from $1.1385 on Wednesday
Pound/dollar: DOWN at $1.3217 from $1.3242
Euro/pound: UP at 86.01 from 85.97 pence
Dollar/yen: UP at 158.98 from 158.29
© 2024 AFP
