Oil futures gained around 0.2% as the prospect receded of a deal to end the conflict in the Middle East. O/R CLc1, LCOc1
Wall Street's S&P and Nasdaq were both up 0.4% in early trade, while European stocks were broadly flat .STOXX. Earlier, stocks across Asia fell on concerns about the outlook for semiconductor companies. South Korean shares closed nearly 6% lower, posting their biggest one-day drop in three weeks. .N225, .KS11
Long-term borrowing costs from the U.S. to Germany and Japan have soared as investors fret over ballooning government debt and high inflation, in part driven by the Iran war pushing up oil prices.
German and French long-dated bond yields, which had earlier risen to their highest in 15 and 18 years respectively, traded lower on the day DE10YT=RR, DE30YT=RR, FR10YT=RR.
"What we've seen in the course of recent days is that the long end of the bond market has obviously been selling off and potentially becoming somewhat problematic for the play through to other asset classes," Jeremy Stretch, head of G10 FX strategy at CIBC, said.
"So, clearly, the Treasury Secretary has to be mindful of those risks and has made adjustments. That's why we are (now) seeing US 30-year Treasury yields down sharply and the dollar cheapening."
A rise in Japan's benchmark 10-year bond yield JP10YTN=JBTC toward 3%, a three-decade high, is also a warning sign for global debt markets that for years have depended on low Japanese rates driving a constant flow of Japanese investment abroad.
"There is a narrative of are we going to have continued higher-for-longer inflation and what does that mean for longer-term interest rates?" said Neil Fisher, investment specialist at St James's Place.
"Then you have a narrative around how sustainable is some of this long-term government debt in the UK and Europe, in the U.S. as well?"
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