Markets mixed as investors eye oil price volatility and US bonds

Shares were trading mixed early on Thursday morning, as investors tried to digest the recent swings in oil prices and the US bond market.

Europe's major indexes opened mostly in the red on Thursday morning, with Germany's DAX down 0.49% to 25,287.42, France's CAC 40 lower by 0.37% to 8,093.68, and the Euro Stoxx 50 also down by 0.41% to 6,273.71 at the time of writing, as investors monitored oil price moves and the US bond market.

Ahead of European markets opening, Japan's benchmark Nikkei 225 gained 1.3% in morning trading to 65,883.41, as some chipmakers got a boost from the recent surge of interest in artificial intelligence. Australia's S&P/ASX 200 fell 0.7% to 8,700.50.

Hong Kong's Hang Seng lost 0.5% to 24,715.95, while the Shanghai Composite dipped 0.8% to 3,902.33. Trading was closed in South Korea for the Chuseok autumn harvest holiday.

In energy trading, benchmark US crude fell 0.82% to $91.40 a barrel. Brent crude, the international standard, lost 0.83% to $102.22 a barrel.

The price of a barrel of Brent remains much higher than the roughly $72 it cost before the war with Iran began, and worries are running high that the war with Iran will keep oil bottled up in the Middle East for a long time. Talks are continuing between US and Iranian officials and mediators, but nothing concrete has come from them yet.

US bond market pressure

Overnight, Wall Street got hit by pressure from the US bond market after a surprisingly strong report on the economy raised worries about inflation.

The S&P 500 fell 0.8% after finishing the prior day just 0.4% below its record set last month. The Dow Jones Industrial Average dropped 352 points, or 0.7%, while the Nasdaq composite sank 1.1% from its own all-time high.

The yield on the 10-year Treasury jumped to 5.10% from 4.96%, a considerable move for the bond market. High yields undercut prices for stocks and other investments, while also slowing the economy by making it more expensive for everyone to borrow money.

Wednesday’s jump briefly sent the 10-year yield near 5.14%, back to where it was in 2007 before the global financial crisis caused yields to crater. Yields have accelerated recently because of worries about high inflation, the US government’s heavy debt and other concerns.

Worries about inflation got a jolt after a preliminary report suggested growth in US business activity surged to its strongest level in more than five years.

US inflation has remained so stubbornly high that the Federal Reserve raised its short-term interest rate last week for the first time in three years. Fed Gov. Michael Barr said in a speech this week that further hikes “are likely to be needed” to get inflation to the Fed’s 2% target.

Although the Bank of Japan recently raised its benchmark interest rate to stem the slide in the Japanese yen, the move was largely priced in for weeks. And so the yen hasn't really bounced back. A weak yen works as a negative for oil-importing Japan when oil prices are soaring.

In currency trading, the US dollar edged down to 157.94 Japanese yen from 158.30 yen. The euro cost $1.1382, little changed from $1.1388.

All told, the S&P 500 fell 58.61 points to 7,706.03. The Dow dropped 352.10 to 51,511.59, and the Nasdaq composite sank 308.24 to 26,936.04.