Bond yields remain squarely at the center of investor concern, with the U.S. 30-year Treasury yield climbing to 5.31% — its highest level since 2007 — and long-term borrowing costs in Europe and Japan also hitting multi-year peaks. The surge in yields has intensified pressure on equities and reshaped risk pricing across global markets.
European Central Bank chief economist Philip Lane said inflation in the euro area is likely to hover near 3% for the rest of the year, comments that reinforced the view of a more persistent inflation backdrop and could complicate the central bank’s policy calculus. The stickier outlook for prices has helped push benchmark European yields higher even as some investors reassess the pace and scale of future rate moves.
Sentiment indicators offered a brighter note for growth in parts of the region: German investor confidence, as measured by the ZEW Institute, rose to 34.2 in August from 26.3 in July, beating market expectations of 30 and signaling improved optimism among professional investors despite the higher-rate environment.
Safe-haven demand has supported precious metals: gold traded close to USD 4,400 an ounce, steady on reduced expectations for additional Federal Reserve rate hikes even as long-term yields climbed. Energy markets have been driven by a volatile geopolitical backdrop — Brent crude held near a two-week high around USD 91 a barrel after reports that another vessel was struck in the Strait of Hormuz, further hardening stances on both sides and keeping traders on edge about potential supply disruptions.
Political and diplomatic developments added to market tensions. Chinese Foreign Minister Wang Yi is due to begin a two-day visit to South Korea to discuss bilateral and global issues, a trip that takes on extra weight as former President Donald Trump has cast doubt on the U.S. commitment to the region, feeding strategic uncertainty in Asian markets.
The combined effect of rising yields and geopolitical risks has taken a toll on risk assets. European equities slipped about 0.5%, while Asian markets lost ground — with Japan and Chinese indexes each down a little more than 1%. U.S. futures pointed to a roughly 1% decline at the open.
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