HONG KONG (AP) — World shares slumped further on Monday as higher risks of broader conflict in the Middle East clouded market sentiment and higher bond yields pressured stocks.
The yield on the 10-year Treasury was at 5% early Friday.
Stocks have been struggling under the weight of the bond market since high yields make borrowing more expensive for everyone and slow the economy while dragging on prices for stocks and other investments.
The yield on the 10-year Treasury briefly topped 5% late Thursday for the first time since 2007, according to Tradeweb. It recently has been catching up to the Federal Reserve’s main interest rate, which is already above 5.25% — its highest level since 2001.
“Indeed, the trajectory of U.S. Treasurys is not merely a question; it is the only question for financial markets,” Stephen Innes of SPI Asset Management said in a commentary. “U.S. government bonds are the critical benchmark reference point against which virtually all other global assets are ultimately priced off.”
The Fed raised its overnight interest rate rapidly hoping to quash high inflation, which has come down from its peak last summer. However, higher oil prices again are threatening to add upward pressure.
In share trading, Germany’s DAX fell 0.4% to 14,743.97 and the CAC 40 in Paris lost 0.3% to $6,798.24. Britain’s FTSE 100 was down 0.2% at 7,388.97. The future for the S&P 500 was 0.1% lower while that for the Dow Jones Industrial Average lost 0.2%.
Israeli warplanes conducted airstrikes on various targets in Gaza early Monday, including areas where Palestinian civilians had been instructed to seek shelter. Israel has announced its intention to step up its attacks on the Gaza Strip in preparation for the next stage of its war on Hamas.
The escalation of conflict in the Middle East has rattled markets, adding to uncertainty about oil supplies from the region if the fighting spreads.
A barrel of benchmark U.S. oil fell 44 cents to $87.64 per barrel early Monday. It has been bouncing around since the latest Hamas-Israel war began, after leaping from $70 per barrel to more than $93 during the summer. It slipped 62 cents to settle at $88.75 per barrel on Friday.
Brent crude, the international standard, slipped 33 cents to $91.83 per barrel.
The Shanghai Composite index fell to the level it was at nearly three years ago before the COVID-19 pandemic, closing down 1.5% at 2,939.29. Hong Kong’s markets were closed for a holiday, as were Thailand’s.
International investors have been shifting their assets out of Chinese shares due to simmering geopolitical tensions, challenging economic conditions, and a crisis in the property industry.
Taiwan’s Taiex gave up 1.2%.
Shares in Taiwan-based Foxconn Technology Co., a Fortune 500 company known for making Apple iPhones, fell 2.2% after Chinese state media reported over the weekend that the company has been subjected to searches by Chinese tax authorities.
Tokyo’s Nikkei 225 index lost 0.9% to 30,999.55 as investors appeared to have little reaction to Japanese Prime Minister Fumio Kishida’s announcement that he plans “bold” measures, including an income tax cut for households hit by inflation and tax breaks for companies, to galvanize lackluster growth in the world’s No. 3 economy.
The Kospi in Seoul lost 0.8% to 2,357.02. Australia’s S&P/ASX 200 sank 0.8% to 6,844.10.
India’s Sensex declined 0.5%.
In currency trading, the U.S. dollar rose slightly to 149.94 Japanese yen from 149.87 yen. The euro cost $1.0604, rising from $1.0600 late Friday.
On Friday, Wall Street racked up more losses to close out its worst week in a month. The S&P 500 fell 1.3% and the Dow sank 0.9%. The Nasdaq composite tumbled 1.5%.
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