Bond yields have climbed to multi-year highs as traders price in the likelihood of central bank hikes to contend with persistent inflation.
Japan's 10-year government bond yield JP10YTN=JBTC climbed 10.0 basis points to 3.075%, a level not seen since August 1996. The U.S. 10-year Treasury yield US10YT=RR rose 1.1 basis points to 5.125%, after reaching the highest since 2007 overnight.
Central bank officials maintained a hawkish tone as rising oil prices drove inflationary pressures. Federal Reserve Governor Michael Barr said on Wednesday the central bank's recent rate hike was part of efforts to recalibrate borrowing costs and signalled more increases may be needed. Markets are anticipating speeches from other Fed officials on Thursday, including New York Fed President John Williams and Cleveland Fed President Beth Hammack.
Geopolitical tensions kept energy prices elevated. Iranian officials communicated with U.S. envoys at the UN General Assembly, but both sides signalled little progress toward ending the conflict. Trump reiterated threats of further escalation, while Iran's president vowed not to yield.
Oil prices declined as traders paused to reassess supply risks tied to the Iran conflict. Brent crude LCOc1 slid 0.79% to $102.27 a barrel and West Texas Intermediate crude CLc1 fell 0.79% to $91.43 a barrel.
The dollar index =USD, which measures the greenback against a basket of currencies, fell 0.05% to 101.08, with the euro EUR= up 0.03% at $1.1383. The Japanese yen JPY= rallied 0.24% to 157.91 per dollar, and sterling GBP= strengthened 0.02% to $1.3239.
On the economic front, the U.S. Labor Department is expected to report that initial jobless claims likely rose to 201,000 in the week ended September 19, while continuing claims likely increased 15,000 to 1.745 million in the prior week. New home sales are forecast to edge up to 615,000 units in August from 607,000 units in July.
Equity futures pointed to down markets in Europe and the U.S. The Euro Stoxx 50 futures STXEc1 slipped 0.35% to 6,303.00, DAX futures FDXc1 fell 0.37% to 25,514.00, and FTSE futures FFIc1 declined 0.34% to 10,740.00. U.S. S&P e-minis ESc1 fell 0.23% to 7,754.25.
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