TOKYO — Global shares mostly slipped Friday as rising yields in the bond market on Wall Street set off expectations that high interest rates would continue in the U.S.
France's CAC 40 declined 0.9% in early trading to 7,126.02. Germany's DAX dipped 0.8% to 15,553.22. Britain's FTSE 100 shed 0.8% to 7,255.18. U.S. shares were set to drift lower with Dow futures down 0.1% at 34,503.00. S&P 500 futures fell nearly 0.1% to 4,381.75.
Japan’s inflation data showed consumer prices rose 3.1% from a year earlier in July, down from 3.3% in June. But that was still higher than the 2.5% forecast by some analysts and above the Bank of Japan's target at 2%.
The core consumer price index, which eliminates energy and fresh food prices from the measure, rose 4.3% on year, according to the Ministry of Internal Affairs and Communications.
Japan's Nikkei 225 slipped 0.6% to finish at 31,450.76. Australia's S&P/ASX 200 was virtually unchanged, inching up less than 0.1% to 7,148.10. South Korea's Kospi shed 0.6% to 2,504.50. Hong Kong's Hang Seng dropped 2.1% to 17,950.85, while the Shanghai Composite edged down 1.0% to 3,131.95.
Also on investors' minds is what appears to be China's shaky recovery from the negative economic effects of the coronavirus pandemic.
“In terms of China, there has been very little cause for optimism due to the dire macro indicators, a plunging yuan and property developers hitting troubled waters,” said Tim Waterer, chief market analyst at KCM Trade.
Stocks broadly have been retreating in August following a torrid first seven months of the year. That’s in part because a swift rise in bond yields is forcing a reassessment of how much to pay for stocks.
The 10-year Treasury, which is the centerpiece of the bond market, is now yielding 4.28% after touching its highest level since October.
If it reaches 4.34%, it will be at a level unseen since 2007, according to Tradeweb. That’s before the financial crisis and Great Recession caused yields to collapse to record lows. The 10-year Treasury was yielding less than 0.70% three years ago.
Higher yields are good for bond investors, who get fatter payouts for their investments. But it hurts stock prices because investors are suddenly less inclined to pay high prices for investments that aren't as steady as bonds.
Higher yields also mean borrowers have to pay more to get cash, which can crimp corporate profits and cause unforeseen things to break in the system, like the three high-profile U.S. bank failures that shook markets this spring.
Yields have been on the rise as more reports show the U.S. economy remains remarkably resilient. On the upside for markets, the data mean the economy has been able to avoid a long-predicted recession. But on the downside, it could also keep upward pressure on inflation. That would give the Federal Reserve reason to keep interest rates higher for longer.
Traders had also been hoping the Fed would begin cutting rates early next year. Such a move would be a relief for markets because high rates work to lower inflation by slowing the entire economy and hurting prices for investments.
A stronger economy would burn more fuel. In energy trading on Friday, benchmark U.S. crude gained 26 cents to $80.65 a barrel. Brent crude, the international standard, rose 16 cents to $84.28 a barrel.
In currency trading, the U.S. dollar edged down to 145.60 yen from 145.83 yen. The euro cost $1.0871, down from $1.0873.
Sourse: abcnews.go.com
