Inflation fears from the Strait of Hormuz closure, alongside the risk of further Gulf supply cuts due to Houthi strikes on Saudi infrastructure on the Red Sea, have again pushed up government bond yields, with investors demanding higher returns for lending money.
The benchmark US 10-year Treasury yield hit its highest level since 2007 on Thursday, and Japan’s government bond yields also hit multi-year highs.
Bank of England Governor Andrew Bailey hinted meanwhile that it could also follow the European Central Bank and US Federal Reserve in hiking interest rates in the coming months, which could curtail inflation but slow economic growth.
As for equities, “a seemingly amicable meeting” between US President Donald Trump and his Chinese counterpart Xi Jinping in Washington helped lift investor sentiment, said Dan Coatsworth, head of markets at AJ Bell.
However, the nations’ extension of a trade truce by two months until January was far less than the two years the Chinese had hoped for.
“US-China trade risks remain… (with) issues over tariffs, agricultural purchases, rare earths, and technology restrictions unresolved,” said MUFG market strategist Lloyd Chan.
Trump said he discussed the stalled Iran war with Xi, and the two leaders confirmed that they would meet for a third and fourth time this year at international summits in China and the United States.
