Global stock markets traded cautiously as rising bond yields and expectations for the Federal Reserve's decision on interest rates increased the risk of volatility in financial markets.
Decline of the S&P 500 Index and Rising Bond Yields
On Tuesday, the S&P 500 index in the United States fell by 0.5 percent, marking its second consecutive decline. Meanwhile, the yield on 10-year U.S. Treasury bonds reached its highest level since 2007, surpassing 5 percent for the first time in three years.
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The yield on these bonds slightly decreased in Asian trading on Wednesday, reaching 4.9875 percent, but remained close to the 5 percent threshold. Rising bond yields increase borrowing costs and may reduce the relative attractiveness of riskier assets, including stocks.
Pressure in Global Markets and Focus on the Federal Reserve
The pressure in the bond market is not limited to the United States. The average yield on 10-year bonds of G7 countries has reached 4.285 percent, the highest level since mid-2008. Increasing government debt, inflationary pressures, and geopolitical tensions are cited as factors contributing to rising borrowing costs in major economies.
In Asia, the MSCI Asia-Pacific stock index, excluding Japan, was volatile after four sessions of decline and ultimately rose by about 0.3 percent. The rise in Taiwanese stocks partially offset the decline in the Chinese market. The Nikkei index in Japan also fell by about 0.1 percent.
Investor focus is now on the Federal Reserve's decision. Market trading indicates that the probability of a 25 basis point interest rate hike has risen to about 92.4 percent, compared to 59.4 percent a week ago. The lack of clear guidance on the next steps for interest rates may lead to increased volatility in the stock market.
In the currency market, the U.S. dollar index is near its highest level in two weeks. At the same time, the cryptocurrency market was stabilizing after recent declines; Bitcoin traded nearly unchanged around $75,900, while Ethereum fell by about 0.3 percent.
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