Asian shares mostly decline as bond market pressure mounts

Asian stock markets experienced a decline on Monday, with oil prices also falling at the start of a week marked by a gathering of top U.S. economic officials in Jackson Hole. U.S. futures ticked downward during the opening bell. In Tokyo, the Nikkei 225 index slipped 0.5% to 65,678.45, while South Korea's Kospi index dropped 3.5% to 6,664.36.

The Hang Seng index in Hong Kong fell 2.1% to 25,465.23, and the Shanghai Composite index declined 0.7% to 3,877.30. Australia's S&P/ASX 200 index managed a slight gain of 0.5% to 9,107.40, breaking the regional downtrend. Taiwan's Taiex index saw a 0.5% decrease.

Investors will receive crucial inflation data on Wednesday when the U.S. releases its Personal Consumption Expenditures (PCE) report for July. This report, preferred by the Federal Reserve, indicates that U.S. consumer inflation remains stubbornly above the 3% target. The Fed has been grappling to bring inflation back to its 2% target.

In early 2025, inflation seemed to stabilize near the target, but it began to rise again as the U.S. imposed tariffs globally, starting in early 2026. This inflation surge coincided with rising bond yields, which forced the U.S. Treasury Department to intervene unusually and raised concerns about increasing borrowing costs affecting consumer spending, the economic engine.

The bond markets found temporary solace when Treasury Secretary Scott Bessent announced the government would double its purchases of longer-term bonds to lower the 10-year Treasury yield and mortgage rates. However, the 10-year yield rebounded to 4.73% by Friday, matching its highest level in over a year, and the 30-year yield also rose, nearing its highest point since 2007.