BY COMFORT OGBONNA
Asian stocks were subdued Thursday while global bond markets remained under pressure as investors assessed softer-than-expected U.S. inflation data, elevated Treasury yields and continuing uncertainty over the conflict in the Middle East.
A weaker-than-anticipated increase in U.S. consumer prices in August reduced expectations that the Federal Reserve would raise interest rates later this month. However, the improvement in inflation failed to provide a significant boost to investor confidence, with concerns about high borrowing costs and elevated energy prices continuing to weigh on markets.
Strong earnings from Micron Technology also provided limited relief to the broader market. The chipmaker reported results that highlighted continued demand for artificial intelligence-related technology and memory products, but investors remained cautious about whether the current shortage in memory chips can continue as demand and supply conditions evolve.
At the same time, uncertainty surrounding efforts to end the seven-month-long war between the United States and Iran continued to support oil prices and added to concerns about inflation and global economic growth.
The MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.2%, while South Korea’s KOSPI slipped 0.14%. Japan’s Nikkei, however, gained more than 1%, supported by advances in chip-related companies.
U.S. stock futures pointed to a modestly stronger opening, with Nasdaq and S&P 500 futures each gaining about 0.3%. European stock futures moved in the opposite direction, falling 0.75% in early trading.
Investors have remained particularly focused on the direction of global interest rates after a difficult September for bond markets. Bond yields rose sharply during the month as prices declined, driven in part by higher energy costs and concerns that stronger economic activity linked to artificial intelligence investment could keep inflation pressures elevated.
The benchmark U.S. 10-year Treasury yield reached 5.306%, its highest level since June 2007. The 30-year Treasury yield stood at 5.634% after reaching 5.6517% in the previous session, its highest level since June 2002.
The rise in long-term borrowing costs has increased attention on whether U.S. Treasury yields can remain above the psychologically important 5% threshold.
Investors are also watching the trajectory of yields rather than focusing only on their absolute level, particularly as concerns over U.S. government borrowing and the country’s fiscal position continue to influence the bond market.
The latest U.S. inflation figures offered some relief on the monetary policy front. Data released Wednesday showed consumer prices rose less than economists had expected in August, while price pressures in the previous month were also revised lower.
The figures prompted traders to reduce expectations for another Federal Reserve interest rate increase at the central bank’s October meeting.
Market pricing showed a 38% probability of an October rate increase, down from 50% a day earlier. The Federal Reserve raised interest rates in September for the first time in three years and indicated that additional increases could be necessary as policymakers continue to assess inflation and economic conditions.
Expectations for another increase were also affected by comments from New York Federal Reserve President John Williams, who said there was no urgency for additional action.
The prospect of slower monetary tightening helped limit pressure on shorter-term U.S. Treasury yields, but longer-term yields remained elevated, reflecting continuing concerns over government borrowing, inflation risks and the cost of capital.
The U.S. dollar remained near a two-month high, supported by higher Treasury yields. The euro was little changed at about $1.1334 after losing 2.5% in September.
The Japanese yen weakened about 0.3%
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