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Bond yields jump as stocks slip

US Treasury yields surged on Tuesday as investors reassessed the outlook for inflation and interest rates, sending Wall Street lower and keeping pressure on Asian equities on Wednesday. The rise in long-dated bond yields, alongside elevated oil prices linked to the Iran conflict, strengthened the US dollar and weighed on sentiment even as China kept lending rates unchanged. US stocks closed in the red on Tuesday, while Asian markets were trading mostly lower on Wednesday. Investors will now look to UK and euro-area inflation data, Federal Reserve meeting minutes and Nvidia’s quarterly results later on Wednesday.

  • Date
  • Auteur Shane Strowmatt, Senior Investment Writer
  • Temps de lecture 5 minutes

USA Interest Rates
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The yield on the 30-year US Treasury rose to 5.2% on Tuesday, up from 5.13% earlier in the session and reaching its highest level since 2007, as investors grew more concerned about persistent inflation and the prospect of higher US interest rates. The 10-year Treasury yield also climbed to as much as 4.7%, from around 4.6% previously, while the sell-off spread to bond markets in Europe and Japan and weighed on US equities. The move has been driven by rising energy-related inflation worries linked to the Iran conflict, as well as concerns about large fiscal deficits and increased government debt issuance. Market participants have also sharply revised their Federal Reserve outlook, with the market now expecting the next move to be a rate rise later this year rather than multiple rate cuts in 2026. The US dollar held near a six-week high on Wednesday, with the US Dollar Index just above 99 after rising more than 1% in May, as investors priced in the possibility of higher US interest rates.

US stocks fall on profit-taking

US stocks closed lower on Tuesday as investors took further profits, with the Nasdaq 100 falling 0.6% to 28,818.84 points, the S&P 500 declining 0.7% to 7353.61 points and the Dow Jones Industrial Average losing 0.7% to 49,363.88 points. The retreat extended a recent pullback from record highs and suggested that the AI-driven rebound in equities has lost momentum for now, even though investor sentiment remains broadly constructive. Alongside higher Treasury yields, concerns about the Middle East conflict and elevated oil prices continued to weigh on markets, with Brent crude oil and West Texas Intermediate (WTI) stable near high levels midweek, trading around USD 111 and USD 104 per barrel, respectively.

Asian stocks fall on tech drag

Asian equities fell on Wednesday as technology shares tracked overnight losses on Wall Street, with South Korea’s KOSPI dropping 1.4% and Japan’s Nikkei 225 falling. Australia’s S&P/ASX 200 fell 1.3%. The sell-off in the region was amplified by news that Samsung Electronics’ union plans to strike on Thursday after wage talks collapsed, pushing the South Korean chipmaker’s shares down as much as 4%. Higher global bond yields and lingering inflation concerns tied to the Iran conflict also weighed on sentiment.

China keeps lending rates steady

China left its benchmark lending rates unchanged on Wednesday for a twelfth straight month, with the one-year loan prime rate held at 3% and the five-year rate at 3.5%, matching market expectations. The decision suggests the People’s Bank of China is not rushing to ease policy, despite weak lending and softer economic activity, as ample liquidity and rising inflation pressures have reduced the case for broad-based rate cuts. Recent data showed China’s growth lost momentum in April, with industrial output slowing and retail sales falling to their weakest level in more than three years. Market participants expect Beijing to favour targeted fiscal support, particularly for infrastructure, rather than wider monetary stimulus. Mainland China’s CSI 300 was essentially flat, while Hong Kong’s Hang Seng Index was trading 0.6% lower on Wednesday.

Euro-area trade surplus narrows

The euro-area goods trade surplus fell to EUR 7.8 billion in March from EUR 11.1 billion in February and EUR 34.1 billion a year earlier, according to estimates released on Tuesday. Exports declined 5.5% year-on-year to EUR 265.3 billion, while imports increased 4.4% to EUR 257.4 billion. The deterioration was mainly linked to smaller surpluses in chemicals and in machinery and vehicles, with the chemicals balance falling to EUR 18.9 billion from EUR 41.8 billion a year earlier. European stock indices were mixed on Tuesday, though most major benchmarks ended in positive territory. The Euro Stoxx 50 edged up 0.1%, while Germany’s DAX gained 0.4% and France’s CAC 40 was little changed. Switzerland’s SMI outperformed, rising 0.9% on Tuesday.

UK unemployment rises as pay slows

UK unemployment rose to 5% in the three months to March, according to data reported on Tuesday, up from 4.9% in February and above market expectations, while regular pay growth eased to 3.4% from 3.6%. More timely payroll figures also pointed to a softer jobs market, with the number of payrolled employees falling by 100,000 in April after a decline of 28,000 in March, while vacancies dropped by 28,000 to 705,000 in February to April, the lowest level in five years. The report said firms were coming under pressure from higher energy costs linked to the Iran conflict, which began in February, even as the UK economy expanded by 0.6% in the first quarter.

Corporate and economic calendar

Corporate news in focus: Quarterly figures from Intuit, Lowe's, Nvidia, and TJX.

Economic data in focus: UK Consumer Price Index (08:00), euro-area Consumer Price Index (11:00), Federal Reserve meeting minutes (20:00).

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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