Global Stock Sell-off as Inflation Fears Rise

Economy SadaNews - Global stocks fell and U.S. bond yields rose to their highest levels in over a year, as concerns grew over a return of inflationary pressures due to a spike in oil prices, at a time when investors began to question the sustainability of the AI-driven rally.

The MSCI Asia-Pacific Index dropped by 2.5%, while losses in the South Korean KOSPI Index, seen as a key gauge of AI investments, soared to 7%. Futures for the NASDAQ 100 declined by 1.1%, indicating increasing pressure on technology stocks.

European stocks are expected to open down about 1.5%, while the dollar rose for the fifth consecutive session as investors flocked to safe-haven assets amid the war in the Middle East.

Inflation fears pressured government bonds, with the yield on U.S. two-year Treasury notes rising by four basis points to 4.06%, and the yield on ten-year notes also climbing the same amount to 4.53%.

In Japan, government bond yields across various maturities rose, with the yield on 20-year bonds increasing by 6.5 basis points to 3.61%, the highest level since 1996.

Trump's Statements Weigh on Markets

Brent crude continued its gains, rising about 2% to trade near $108 a barrel, after U.S. President Donald Trump stated that the United States does not need to reopen the Strait of Hormuz, before later confirming that his country wants the waterway to remain open.

The decline in momentum in the stock markets came after a record rally driven by strong corporate earnings and the resilience of the U.S. economy, amid bets that AI-related spending would support profit growth. However, the rise of oil above $100 a barrel rekindled fears of renewed inflation, which reduces the chances of interest rate cuts and increases the likelihood of tightening monetary policy.

Dylan Woo, a research strategist at Pepperstone Group, stated that markets "have completely priced out any chance of a U.S. rate cut this year and have begun to price in a new hike before the end of the year."

He added: "With oil prices remaining high, the ability of stocks to ignore these developments is becoming a source of concern day by day."

Markets Await Results of Trump-Xi Summit

Investors are also watching the summit between Trump and Chinese President Xi Jinping, with Xi stating that the two sides have formed a "new relationship" and have achieved "many results," without disclosing full details so far.

While Trump described his meeting with Xi as "wonderful," tensions remain over Taiwan, as China called for a quick reopening of the Strait of Hormuz and the resumption of talks regarding the war with Iran.

On the corporate front, Trump said that China has agreed to purchase 200 Boeing aircraft, in a multi-billion dollar deal that marks the first Chinese order for U.S. aircraft in nearly a decade.

Additionally, Hon Hai Precision Industry, which assembles NVIDIA servers, reported quarterly profits that exceeded expectations, reflecting continued strong spending on AI-related infrastructure.