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Bond yields unsettle global equities

Concerns that US interest rates may need to remain higher for longer gripped markets on Wednesday after robust business surveys and a rise in energy costs added to inflation pressures. Wall Street finished lower, while Asian bourses were mixed on Thursday, with declines in Chinese equities partly offset by gains in Japan. Treasury yields remained at multi-year highs and the US dollar stayed firm, as investors also monitored US President Donald Trump’s meeting with Xi Jinping following an extension of the US-China trade détente.

  • Date
  • Author Shane Strowmatt, Senior Investment Writer
  • Reading time 5 minutes

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Most Asian equity markets declined on Thursday as higher global bond yields and elevated oil prices weighed on risk appetite, while investors awaited talks between US President Donald Trump and Chinese President Xi Jinping in Washington. Mainland China’s CSI 300 lost 1.4% and Hong Kong’s Hang Seng Index declined 0.5%, whereas Japan’s Nikkei 225 advanced 1.3% after a three-day holiday. The US 10-year Treasury yield surpassed 5.1%, its highest level since 2007, while Australia’s S&P/ASX 200 dropped 0.7% after unemployment reached a five-year high. Gold was 0.1% lower at around USD 4280 per ounce, while bitcoin fell 2.7% to around USD 84,200.

US and China extend trade truce

The US and China agreed to prolong their trade truce by two months until 10 January, Treasury Secretary Scott Bessent said on Wednesday, keeping lower tariffs in place and rare-earth supplies flowing. The arrangement extends a one-year agreement reached by US President Donald Trump and Chinese President Xi Jinping in October of last year, which had been due to expire in November.

US stocks retreat as oil prices climb

US equities declined on Wednesday as higher oil prices, strong economic data and rising bond yields revived inflation concerns and expectations that the Federal Reserve (Fed) could raise interest rates again. The Dow Jones Industrial Average fell 0.7% to 51,511.59 points, while the S&P 500 lost 0.8% to 7706.05 and the Nasdaq-100 dropped 0.9% to 30,470.29 after reaching a record high on Tuesday. Brent crude rose by as much as 4.5% to almost USD 104 per barrel on Tuesday following reports of another ship attack in the Strait of Hormuz, but Brent futures retreated slightly to USD 103.22 per barrel on Thursday, while West Texas Intermediate (WTI) futures were near USD 92.12 per barrel.

US business growth accelerates

US private-sector activity accelerated in September, with the composite PMI climbing to 58.4 from 56.0 in August, its highest reading since July 2021, S&P Global data showed on Wednesday. Services activity reached a 59-month high and manufacturing output expanded at its fastest pace since April 2022, while stronger demand prompted the sharpest employment growth since June 2022. Input-cost inflation rose to its highest level since October 2022 as higher fuel, transport and raw-material costs, alongside supply-chain delays, added to price pressures. The US dollar remained near a two-month high on Thursday after the stronger-than-expected manufacturing data revived inflation concerns and expectations of further Fed tightening. The Dollar Index held close to 101.1 points.

Euro-area business growth accelerates

Euro-area private-sector activity accelerated in September, with the composite PMI rising to 53.1 from 52.0 in August, its highest level since April 2023, S&P Global data showed on Wednesday. Services activity strengthened to a ten-month high, while manufacturing output reached its fastest pace in 55 months, supported by stronger new orders and a solid expansion in Germany. Rising energy prices linked to the Middle East conflict contributed to the fastest input-cost and output-price inflation since May, although firms’ confidence in the year-ahead outlook eased. European stock indices had closed lower on Wednesday: the Euro Stoxx 50 declined 0.4%, Germany’s DAX fell 0.7%, France’s CAC 40 shed 0.4% and the Swiss Market Index lost 0.2%.

Corporate and economic calendar

Corporate news in focus: Quarterly figures from Costco.

Economic data in focus: Swiss National Bank interest rate decision (09:30), German ifo Business Climate Index (10:00), US weekly initial jobless claims (14:30), US building permits (14:30), Canadian retail sales (14:30) and US new residential sales (16:00).

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