Global stock markets are experiencing significant pressure as soaring U.S. Treasury yields fuel expectations for more aggressive Federal Reserve rate hikes, triggering a broad sell-off. While U.S. equity futures traded mostly flat early Thursday after previous declines, Asian markets showed mixed performance amid ongoing Mideast tensions and developments from the U.S.-China trade talks, including an extended trade truce. The benchmark 10-year Treasury yield hit its highest level since July 2007, impacting borrowing costs and investor sentiment globally.
Global financial markets are grappling with significant volatility as soaring U.S. Treasury yields trigger a broad sell-off and intensify expectations for further interest rate hikes from the Federal Reserve. Early Thursday, U.S. stock futures remained largely flat, reflecting caution after a tumultuous trading day.
On Wednesday, the S&P 500 slid 0.8%, while the Nasdaq Composite, breaking a four-day winning streak, fell 1.1%. This downturn was mirrored in futures trading, with S&P 500 futures down 0.31% and Nasdaq-100 futures slipping 0.34%.
The benchmark 10-year Treasury note yield surged to 5.135%, reaching its highest point since July 2007, a move that typically tightens consumer finances through increased borrowing costs. Similarly, the 2-year note yield climbed to 4.947%, a level not seen since May 2024.
This surge in yields has significantly raised the market's anticipation for more aggressive monetary policy. The CME FedWatch tool now indicates a greater than 68% probability that the Federal Open Market Committee will raise its key rate again in October, a sharp increase from roughly 49% just a week prior.
Internationally, Asia-Pacific markets presented a mixed picture. Japan's Nikkei 225 rose 1% following a three-day holiday, though the Topix dipped 0.09%. Australia's S&P/ASX 200 was down 0.76%, while Hong Kong's Hang Seng index dropped 0.52%, and mainland China's CSI 300 fell 1.29%. South Korean markets were closed for a holiday.
In commodity markets, oil prices rebounded on Wednesday. International Brent crude futures settled up 3.9% at $103.08 a barrel, and West Texas Intermediate crude gained 1.8% to $92.16.
Economic data from S&P Global's manufacturing and services purchasing managers' indexes suggested robust U.S. business activity. However, BMO Capital Markets cautioned that strong results, combined with severe supply chain bottlenecks and elevated fuel costs, could exacerbate inflationary pressures. Vail Hartman, a U.S. rates strategist at BMO, noted that the data reinforces the risk of demand-driven inflation escalating.
Looking ahead to Thursday, investors will monitor weekly jobless claims for insights into the labor market. Key corporate earnings reports are also due, including Olive Garden parent Darden Restaurants in the morning and big-box retailer Costco Wholesale in the afternoon.
Live Updates:
U.S.-China trade truce extended for two months
U.S. Treasury Secretary Scott Bessent announced Wednesday that the U.S. and China have extended their trade truce, maintaining lower tariffs and ensuring rare earth flows. The agreement, originally set to expire in November, will now run until January 10, with Bessent indicating Beijing needs to meet further deliverables. Chinese President Xi Jinping is in Washington, D.C. for a state visit.
SoftBank shares jump over 7% after $11.1 billion bond issuance to fund OpenAI bet
SoftBank Group shares surged more than 7% on Thursday as Japanese markets reopened. The technology investor announced an $11.1 billion bond issuance ($10 billion in dollar-denominated notes and 1 billion euros) to fund its final $10 billion payment for a $30 billion follow-on investment in OpenAI, expected to close October 1, alongside other corporate purposes.
Japan's 10-year bond yield hits 30-year high following sell-off in Treasurys
Japan's 10-year government bond yield climbed 8 basis points to 3.062% on Thursday, marking its highest level since August 1996. The 30-year yield also rose to 4.147%. This surge followed a sell-off in U.S. Treasury yields, with inflation concerns exacerbated by a weaker yen. UOB attributed the sell-off to rebounding oil prices, strong U.S. PMI data, and weak demand at a U.S. $70 billion 5-year Treasury auction.
Oil falls on report Asia will import highest volume of crude since start of Iran war
Oil prices dipped on Thursday amidst reports that Asia is set to import its highest volume of crude oil since the beginning of the U.S.-Iran conflict. Futures for international benchmark Brent crude for November delivery declined 0.52% to $102.54 a barrel, while U.S. West Texas Intermediate futures dropped 0.34% to $91.85 per barrel. Reuters, citing Kpler data, reported Asia's September crude oil imports at 23.96 million barrels per day, up from August and the highest since February.
Mainland China and Hong Kong shares open mixed
Mainland China and Hong Kong stock markets opened mixed as investors closely watched developments from the Xi-Trump meeting for clues on future U.S.-China trade relations. Hong Kong's Hang Seng index dropped 0.36%, while mainland China's CSI 300 remained flat.
Asia-Pacific markets traded mixed amid Mideast tensions, Xi-Trump meeting
Early Thursday, Asia-Pacific markets showed mixed trading. Japan's Nikkei 225 added 0.64% after a three-day holiday, while the Topix slipped 0.17%. Australia's S&P/ASX 200 was 1.33% lower. South Korea's markets were closed, and Mideast tensions also contributed to market sentiment.
Japan's Nikkei 225 set to open higher following holidays
Japan's Nikkei 225 was poised for gains on Thursday as markets reopened after a three-day holiday, with Chicago futures at 66,060 and Osaka at 65,940, compared to its last close of 65,018.95. Hong Kong's Hang Seng index futures were at 24,709, and Australia's S&P/ASX 200 futures traded at 8,706. Meanwhile, tensions between the U.S. and Iran remained high after Iranian President Masoud Pezeshkian blamed the U.S. and Israel for global instability at the United Nations General Assembly, vowing continued resistance.
Costco and BlackBerry set to report earnings
Costco and BlackBerry are scheduled to release their earnings reports on Thursday. Analysts anticipate Costco to report $94.86 billion in revenue and $6.53 EPS for the fourth quarter, following a strong third quarter. BlackBerry is expected to post $142.5 million in revenue and 4 cents per share for its quarterly results.
Stock futures open flat on Wednesday evening
U.S. equity futures showed minimal change as they opened on Wednesday at 6 p.m. in New York. Futures tied to the S&P 500 saw a slight advance of 0.06%, Nasdaq-100 futures climbed 0.1%, and Dow futures edged up 21 points, or 0.04%.
