Bond selloff pressures stocks as oil crosses US$91 a barrel

Global bond yields surged to record highs on Tuesday as Middle East conflicts and rising oil prices sent stocks reeling. The 10-year US Treasury yield climbed to 4.78%, near a 20-month peak, while Japan's benchmark 10-year yield approached a 3% level not seen in a generation. US futures steadied after modest overnight declines, but investors remained cautious ahead of Friday's US jobs data.

Higher oil prices and escalating US-Iran tensions fueled concerns about inflation, which could negatively impact bonds. Fed Chair Kevin Warsh hinted that policymakers might raise rates if inflation pressures persist. In Asia, Japan's Nikkei slipped by 0.2% and the Hang Seng dropped 0.7%, pressured by Shein's disappointing IPO debut.

Long bond yields in Germany and France hit a 15-year high, with bund futures nearing a 15-year low. Brent crude prices crossed the $91 mark, while Europe's gas price hit a 3-1/2-year peak. The global interest rate hike on Wednesday and upcoming hikes in Europe next week appeared likely. Geopolitical tensions, including US threats against Iran and Russia-Ukraine conflict, added to the market's discomfort.

Despite rising borrowing costs, the U.S. dollar showed relatively little support, with the euro and yen remaining steady against the greenback. Shein shares fell in Hong Kong early trade, trading just below an already reduced offering price. The Chinese fast-fashion brand, famous for its $5 tops and $10 dresses, faced a weaker market due to tariff and duty changes in the US and Europe, which have undermined its cost-competitive strategy.