Stocks Drop as Oil Tops $107 and Bond Yields Hit Decade Highs
Asian equities fell sharply on Friday. Brent crude reached $107.76. The 30-year US Treasury yield hit 5.36 percent. Rate hike expectations rose above 70 percent.
Brent crude oil prices reached $107.76 per barrel on Friday. This level marks the highest point since May. Asian stock indices followed the energy sector downward. The Nikkei 225 index dropped 2.8 percent. The Hang Seng index fell 1.2 percent. The Shanghai Composite lost 1.7 percent. These moves reflect a broad risk-off sentiment across the region.
Oil prices have surged more than 30 percent in the past week. Tensions in the Middle East continue to drive this rise. The US and Iran exchanged strikes near the Strait of Hormuz. Yemen’s Houthis attacked Saudi energy targets. They also seized control of the Mocha port in the Red Sea. These events threaten key global energy shipping routes.
Bond Yields Reach Post-Crisis Peaks
The 30-year US Treasury yield reached 5.36 percent. This is the highest level since 2007. The 10-year yield is close to five percent. This is nearly a 19-year high. A $6 billion government buyback failed to lower these rates. Investors expected a larger purchase. The European Central Bank also raised rates on Thursday. It warned of a prolonged period of high prices.
Inflation Data Fuels Rate Hike Bets
US producer prices accelerated to 5.4 percent in August. This was up from 4.8 percent in July. Energy costs drove this increase. The figure exceeded market expectations. According to GN markets/inflation, this data strengthens the case for tighter monetary policy. Investors now see a greater than 70 percent chance of a quarter-point rate hike by the Federal Reserve. This expectation was measured by the CME Group FedWatch tool.
Currency Markets React to Policy Shifts
The US dollar strengthened against the Japanese yen. The exchange rate rose to 154.46 yen from 154.34 yen. This move occurred despite recent bets on Bank of Japan hikes. The euro slipped slightly against the dollar. It fell to $1.1611 from $1.1609. The pound also traded in this volatile environment. Market participants are adjusting portfolios based on new inflation data and geopolitical risks.
