TOKYO: Financial markets turned cautious on Thursday as rising government bond yields weighed on investor sentiment, while oil prices retreated from recent highs amid renewed attention on diplomatic efforts involving the United States, China and Iran.
Japanese government bonds came under heavy selling pressure after a sharp move higher in U.S. Treasury yields. When Tokyo’s markets reopened following a three-day holiday, the benchmark 10-year Japanese government bond yield climbed to 3.06%, its highest level in roughly three decades.
The 30-year Japanese yield also advanced, reaching 4.12%, while the U.S. 10-year Treasury yield remained around 5.11% after touching its highest point since 2007 during the previous session.
The rise in borrowing costs has added pressure to equities, with investors increasingly focused on persistent inflation and the possibility that central banks could keep interest rates higher for longer.
“Equities are really showing some signs of creaking under the weight of ever-rising bond yields,” National Australia Bank FX strategist Ray Attrill said. He added that the U.S. dollar continued to receive support as investors sought safer assets.
Asian markets offered a mixed picture. The MSCI Asia ex-Japan index declined 0.64%, while Japan’s Nikkei 225 gained 1.73%. Australia’s S&P/ASX 200 dropped 1.2%, slipping to a more than three-month low.
Washington and Beijing seek to keep trade truce alive
Trade relations between the United States and China remained another major focus for investors as U.S. President Donald Trump and Chinese President Xi Jinping met in Washington.
Treasury Secretary Scott Bessent said the two countries had reached an agreement to extend their existing trade truce. Xi’s visit marked his first trip to the United States in nearly three years.
Markets were not expecting a sweeping breakthrough from the meeting, but an extension of the trade arrangement could help prevent another escalation in tensions between the world’s two largest economies.
Oil retreats as Iran tensions persist
Crude prices moved lower despite continued uncertainty surrounding the conflict involving Iran and the United States.
Brent crude fell about 1% to $102.05 a barrel, while U.S. West Texas Intermediate declined 0.74% to $91.48.
Iranian officials held contacts with U.S. representatives on the sidelines of the United Nations General Assembly, although there were few signs of a significant diplomatic breakthrough. Trump continued to warn of possible escalation, while Iran’s president said the country would not surrender.
Gold, meanwhile, rose 0.35% to $4,301.89 an ounce.
Investors await economic signals
Attention was also turning toward a fresh round of U.S. economic data and comments from central bank officials. Weekly jobless claims were expected to show an increase to 201,000 for the week ending September 19, while continuing claims were forecast to rise to 1.745 million.
New home sales were projected to reach 615,000 units in August, compared with 607,000 in July.
Federal Reserve officials have continued to signal concern about inflationary pressures. Governor Michael Barr said the recent rate increase was part of an effort to adjust borrowing costs and indicated that additional increases could be necessary.
Further comments from New York Fed President John Williams and Fed President Beth Hammack were expected to provide additional clues about the central bank’s outlook.
In currency markets, the dollar index edged down 0.04% to 101.09. The euro slipped 0.02% to $1.14, while the yen strengthened 0.24% to 157.91 per dollar.
European markets were also positioned for a weaker opening. Euro Stoxx 50 futures fell 0.33%, DAX futures declined 0.33%, and FTSE futures were down 0.35%.
With bond yields climbing, geopolitical risks unresolved and trade negotiations still in focus, investors were navigating a market where interest-rate expectations and global diplomacy remained closely intertwined.
