BY COMFORT OGBONNA
Asian stock markets were mixed Friday as investors assessed a sharp sell-off in global government bonds, higher borrowing costs and continuing uncertainty surrounding the conflict involving the United States and Iran.
Markets were also focused on a U.S. monthly employment report due later in the day, with investors looking for fresh evidence about the strength of the American economy and the possible direction of interest rates.
Japan’s Nikkei 225 fell 0.9% to 68,326.72, while South Korea’s Kospi gained 0.2% to 6,984.96. Hong Kong’s Hang Seng Index dropped 2.7% to 23,956.32, its lowest level since July.
Australia’s S&P/ASX 200 advanced 0.4% to 8,651.30, while Taiwan’s Taiex gained 0.2%. Markets in mainland China were closed for a holiday.
U.S. stock futures edged higher early Friday as Treasury yields stabilized after a turbulent session in global bond markets.
The yield on the 10-year U.S. Treasury was around 5.25% Friday, down slightly from Thursday’s high of 5.34%, its highest level since 2002. The benchmark yield moved above 5% last month as investors demanded greater compensation for holding government debt amid concerns over inflation, rising energy costs and the growing U.S. fiscal burden.
The 5% level has become an important psychological threshold for investors because movements above it can have broad implications for borrowing costs and financial markets.
David Clewell, a portfolio manager at T. Rowe Price, described the 5% level as an “important psychological threshold” for investors.
Clewell also said there was a “credible” possibility that the 10-year Treasury yield could eventually move toward 5.5% to 6% if the U.S. economy remains resilient.
Higher government bond yields can put pressure on stock markets because they increase borrowing costs and can make fixed-income investments more attractive relative to equities. Companies also face higher costs when issuing debt, while consumers can encounter more expensive mortgages and other forms of credit.
European stocks fell sharply Thursday as government borrowing costs rose. U.S. markets were more resilient, with the S&P 500 gaining 0.2%, the Dow Jones Industrial Average rising less than 0.1% and the Nasdaq composite advancing less than 0.1%.
Investors are now turning their attention to the U.S. employment report for September, which could provide important clues about the strength of the economy and the Federal Reserve’s next policy decisions.
The report is particularly significant because the Federal Reserve raised interest rates in September for the first time in three years. A stronger-than-expected labor market could reinforce concerns that inflationary pressures may remain persistent, while weaker employment data could increase expectations for a less aggressive approach to monetary policy.
Beyond interest rates, financial markets remain sensitive to developments in the Middle East. Oil prices were relatively stable Friday as investors continued to assess the possibility of further escalation between the United States and Iran.
The United States is deploying additional military forces to the region, including thousands of troops aboard a group of ships and another aircraft carrier, according to a U.S. official. The move comes amid heightened tensions and threats of further military action.
President Donald Trump has also warned of possible escalation while leaving open the possibility of negotiations with Iran.
The uncertainty has kept oil prices well above levels seen before the conflict. Brent crude, the international benchmark, fell 0.2% to $102.13 a barrel Friday after rising in the previous session.
Brent was trading at about $72 a barrel in late February before the war, highlighting the significant increase in energy costs since the conflict began.
Higher oil prices are a major concern for financial markets because they can feed into inflation by increasing transportation, manufacturing and household energy costs. Persistent increases in energy prices could complicate efforts by central banks to bring inflation under control while maintaining economic growth.
Investors are also watching the potential impact of the conflict on global trade and energy supplies, particularly if tensions disrupt shipping routes or threaten oil flows through strategically important waterways.
Currency markets were relatively subdued. The U.S. dollar slipped to 157.91 Japanese yen from 158.09 yen, while the euro rose to $1.1250 from $1.1244.
The combination of elevated bond yields, higher energy prices and uncertainty over monetary policy has created a challenging environment for investors. Markets are now balancing signs of resilient economic activity against concerns that higher borrowing and energy costs could eventually weigh on growth.
The U.S. employment data is expected to provide another important piece of information as investors assess whether the world’s largest economy can continue to withstand elevated interest rates and whether inflationary pressures could force policymakers to maintain a restrictive monetary stance for longer.
Meanwhile, the continued rise in government borrowing costs is keeping pressure on financial markets worldwide, with investors increasingly focused on whether yields will stabilize or continue moving higher in the months ahead.
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