Bond Sell-Off
A sell-off of bonds from key countries worldwide deepened on Tuesday, sending government borrowing costs soaring and equities lower as investors fretted that energy-driven inflation would force central bankers to hike interest rates. The latest bout of fighting between the United States and Iran has pushed oil prices higher, stoking fears of tighter monetary policy that could weigh on economic growth.
Heavy selling sent the interest rate on 30-year UK government bonds to the highest since 1998, while the 10-year yield surged to a level not seen since the global financial crisis of 2007-08. Japan's 10-year bond yield touched a 30-year high of three percent. The yield on the 30-year US Treasury bond stood at 5.27 percent, not far from levels last seen in 2007.
Eurozone inflation three-year high
Official data showed that eurozone inflation hit a three-year high at 3.3 percent in August, cementing expectations that the European Central Bank would raise interest rates next week. Oil prices jumped around two percent on Tuesday after the US and Iran traded fire for the first time in weeks, and President Donald Trump threatened to hit Iran "hard."
"The bond sell-off has been a global affair," said Deutsche Bank's Jim Reid. "The main culprit was the weekend escalation in the Middle East." European stocks tumbled, with Frankfurt shedding more than one percent. Asian markets followed Wall Street lower, with Tokyo, Hong Kong and Shanghai all falling.
Shares in fast-fashion giant Shein slumped 10 percent at one point on its long-awaited Hong Kong trading debut.