Asian stocks and bonds are projected to fall following a significant increase in oil prices, which triggered a selloff in US markets. Concurrently, recent inflation data has bolstered expectations that the Federal Reserve will raise interest rates very soon. This market reaction came after Brent crude surpassed $107 a barrel on Thursday, leading to multiyear highs for Treasury yields and pushing the dollar to its strongest level in a week.
US bond yields have continued their ascent, reaching new multiyear highs, driven by the extended surge in oil prices. This has led traders to increase their bets on a Federal Reserve rate hike as early as next week. Treasury yields rose by six to eight basis points across various maturities, with the 30-year bond hitting levels not seen since 2007, and the two-year note exceeding 4.5% for the first time since 2024. Market participants are now pricing in about a 70% chance of a Fed rate hike next week and fully expect a move by October, rather than December.
The S&P 500 closed lower as rising Treasury yields and inflation concerns weighed on investor sentiment. US stocks declined on Thursday after August's producer price data and surging oil prices intensified worries about a Federal Reserve rate hike next week. The increase in Treasury yields also made stocks less appealing to investors. Major chipmakers such as Nvidia and Micron Technology experienced losses, falling 2.3% and 4.7% respectively, contributing to the S&P 500's decline. However, Apple saw a 3.6% gain after releasing its new $1,999 folding iPhone.
The selloff in the US bond market intensified on Thursday, propelled by spiking oil prices that fueled inflation fears and a lower-than-expected bond purchase by the Treasury Department in its first expanded buyback operation. Two-year yields surged significantly, marking their largest jump since April 2025. This market movement began early in the session after escalating Middle East turmoil pushed oil to a four-month high and wholesale price gauges indicated building inflationary pressures. Doubts about Treasury Secretary Scott Bessent's intervention to stabilize the market also contributed to the selloff.
