Global equities slump as bond yields surge on Middle East inflation fears
Escalating tensions in the Middle East and stronger-than-expected US manufacturing data have reignited inflation concerns, pushing global bond yields to their highest levels in years and triggering a broad sell-off across international stock markets.
Global equity markets suffered a sharp sell-off on Friday as surging bond yields and rising inflation fears weighed heavily on investor sentiment. The S&P 500 Index closed down 1.24 per cent, the Dow Jones Industrial Average fell 1.07 per cent, and the Nasdaq 100 Index dropped 1.54 per cent. Overseas indices mirrored the decline, with Europe’s Euro Stoxx 50 falling 1.81 per cent, Japan’s Nikkei Stock Average dropping 1.99 per cent, and China’s Shanghai Composite closing down 1.02 per cent.
The selloff was driven by a broad retreat in global bond markets, where yields spiked to multi-year highs amid soaring crude oil prices. The 30-year US Treasury yield surged to a closing level of 5.13 per cent, marking its highest point since June 2007. The benchmark long bond broke above the psychological 5 per cent threshold, rising 12 basis points as investors reassessed the trajectory of interest rates. Global bond yields rose sharply, with the Japanese 10-year JGB bond yield jumping to a 29-year high and the UK 10-year gilt yield surging to an 18-year high.
Crude oil markets rallied as peace negotiations between the United States and Iran collapsed, keeping the Strait of Hormuz effectively closed and tightening global supplies. June WTI crude oil closed up 4.20 per cent to a 1.5-week high. The International Energy Agency warned in a monthly report that global oil inventories had declined at a rate of about 4 million barrels per day in March and April, with the market remaining severely undersupplied until October. Goldman Sachs estimates that the disruption has drawn down nearly 500 million barrels from global crude stockpiles.
US economic data further fuelled inflation concerns, with the May Empire manufacturing survey showing general business conditions unexpectedly rising to a four-year high of 19.6. April manufacturing production also rose by 0.6 per cent month-on-month, the largest increase in 14 months. The stronger data pushed the 10-year T-note yield to an 11.75-month high of 4.598 per cent, while swaps are now discounting an 88 per cent chance of a 25 basis point European Central Bank rate hike at its next policy meeting.
Sector performance reflected the macroeconomic headwinds, with chipmakers and mining stocks retreating. ARM Holdings closed down more than 8 per cent, leading losers in the Nasdaq 100, while major miners including Hecla Mining and AngloGold Ashanti fell more than 9 per cent. Conversely, energy producers moved higher, with APA Corp rising more than 5 per cent and Exxon Mobil gaining more than 3 per cent. Cryptocurrency-exposed stocks also fell, with Coinbase Global closing down more than 7 per cent as Bitcoin dropped to a 1.5-week low.
