Bonds, global stocks and precious metals fell Friday as renewed inflation concerns and geopolitical uncertainty drove broad selling across markets.
Government bonds, global stocks and precious metals sold off Friday as renewed inflation concerns, geopolitical tension and uncertainty around the U.S.-Iran war pushed investors out of several major asset classes.
By 10:56 a.m. in London, yields on major sovereign bonds had climbed sharply. The yield on the U.S. 10-year Treasury was almost 9 basis points higher at 4.544%, its highest level in nearly a year. The U.K.’s benchmark 10-year gilt yield was up 15 basis points, while Japan’s 2-year bond yield rose as much as 19 basis points before easing to trade 12 basis points higher. Bond yields move in the opposite direction from prices.
The pressure spread across equity markets. Stocks in Asia and Europe traded sharply lower, and U.S. equity futures pointed to a weaker Wall Street open, a day after the Dow Jones Industrial Average reclaimed the 50,000 level and the S&P 500 closed above 7,500 for the first time.
Metals were also hit. Spot gold fell 2% to $4,552.59 an ounce, while spot silver dropped 6.5% to $78.08 an ounce. Front-month silver futures were down 7.7%, and several U.S.-listed silver and gold funds and miners fell in premarket trading.
The U.S. dollar index rose about 0.4% as inflation worries gave the greenback a lift. Oil prices also jumped after President Donald Trump said China had agreed to buy American oil, according to the captured CNBC report. Trump’s three-day summit with Chinese President Xi Jinping ended without a major announced agreement, despite signs of warmer ties between Washington and Beijing.
Market analysts cited a combination of forces behind the selloff, including concern that an energy shock could keep inflation elevated and push central banks toward tighter policy for longer. U.K. political uncertainty and questions over fiscal policy also added pressure to gilt markets.
“Rising bond yields are once again imposing their will on markets, tightening financial conditions and sapping risk appetite across asset classes,” Lauren Hyslop, investment manager at Mattioli Woods, told CNBC.
Morningstar’s Evangelia Gkeka said higher inflation expectations can prompt bond investors to demand higher returns. She also pointed to dollar strength, expectations for higher rates and possible profit-taking in liquid assets such as precious metals and equities.
Tom Ross, head of high yield at Janus Henderson Investors, said investors were repricing oil higher for longer and preparing for a more persistent inflation backdrop. He also pointed to shifting expectations for the Federal Reserve, with money markets pricing in almost no chance of rate cuts this year and a 50% chance of a December hike, according to CME’s FedWatch tool cited in the report.
For investors, the immediate question is whether Friday’s jump in yields settles or becomes a broader tightening of financial conditions. The next signals to watch are the direction of oil, the dollar and rate expectations as markets reassess how persistent inflation pressure may prove.
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