Global bond yields hovered near multi-decade highs on Friday as high oil prices stemming from the Middle East conflict stoked concerns about inflation and rate hikes, while U.S. and European shares edged above this week's lows.
News that the U.S. administration will impose higher tariffs on goods from 60 trading partners also did not help the inflation picture, with 30-year Treasury yields marching towards their highest since 2007 and German 10-year Bund yields, the benchmark for the euro zone, holding close to their highest since 2011.
Oil, rates and currencies keep pressure on markets
Brent crude slipped 3% to $97.69 a barrel, after surging 7% overnight to a two-month high of $102. Attacks by Iran-aligned Houthis on Saudi tankers in the Red Sea risk choking off a second crucial Middle East artery for global oil supplies, alongside Iran's near-closure of the Strait of Hormuz.
President Donald Trump threatened "major military punishment" for Iran and its Houthi allies, while the U.S. military conducted a 13th consecutive night of attacks.
Most major currencies were steady against the dollar on Friday, though the dollar index was on pace for its biggest weekly jump in about a month, driven in large part by growing expectations for the Federal Reserve to raise interest rates.
Markets show traders believe central banks are more likely to raise borrowing costs, with a one-in-three chance of a rate hike from the Fed as soon as next week - a sea change from merely a week ago - while a move in September is more than fully priced in.
The European Central Bank left rates unchanged on Thursday, but a September rate hike is about 70% priced in. Data on Friday offered a more optimistic economic outlook, after surveys of business activity showed Germany's private sector returned to growth in July for the first time in four months and contraction in France's private sector eased this month.
In bond markets, the benchmark 10-year U.S. yield hit a more than 18-month high of 4.7135%, having climbed 14 basis points this week. The yield on 30-year bonds was steady at 5.1606%, not far from a 19-year peak of 5.201%.
The yen was pinned near 40-year lows at 163.77 per dollar, drawing warnings from the U.S. Treasury about excess volatility in the currency and from Japan's finance minister.
Precious metals edged higher in choppy trading, with gold up 0.3% at $4,060.7 an ounce after falling 2% the day before, while silver advanced 1.2% after a decline of 3.4% on Thursday.
Stocks and futures edge higher after Thursday's losses
The pan-European STOXX 600 rose 0.3% after a more than 1% drop in the last session, on pace for a mild weekly gain while stock index futures on Wall Street also pointed to a slight rebound after Thursday's weakness.
Nasdaq futures inched 0.1% higher, with a near 4% jump in chipmaker Intel during premarket trading following bumper results. Tech stocks have been under pressure this week as investors grow increasingly uneasy about multi-billion-dollar spending on AI that has yet to yield conclusive evidence of paying off.
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