By Caroline Valetkevitch and Harry Robertson
NEW YORK/LONDON, Sept 1 (Reuters) - Global bond yields rose again and stocks eased on Tuesday as a jump in oil prices fueled concerns about inflation and the potential for interest rate hikes.
Japan's 10-year benchmark yield hit 3% for the first time since 1996, pushing up government borrowing costs, while British and euro zone yields hit over-10-year highs.
U.S. Treasury yields retreated from earlier highs in the wake of U.S. economic data. The yield on 10-year
Treasury notes was last up 1.2 basis points at 4.77% after climbing to 4.798%, its highest level since January 14, 2025. Yields move inversely to prices.
"The global bond selloff is putting worldwide central banks on notice," said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma.
"Potentially it's rate hikes across the board. That's not good for any company including tech," he said. Higher rates increase borrowing costs for businesses as well as consumers.
Oil prices were up more than 2% following the recent resumption in fighting between the U.S. and Iran and renewed fears of supply disruptions from the Middle East. U.S. crude was last up 2.8% at $88.16 a barrel, while Brent rose to $92.59 per barrel, up 2.32% on the day.
U.S. Treasury Secretary Scott Bessent said on Tuesday that Washington was likely to announce bank sanctions against Iran this week, stepping up an attempt to "economically asphyxiate" Iran's leadership after six months of conflict. Tehran remained defiant, warning that it would prevent oil being exported from the Gulf.
Data on Tuesday showed euro zone inflation rose back above 3% in August due to higher energy costs, bolstering the case for a September rate hike from the European Central Bank.
Federal Reserve Chair Kevin Warsh gave a speech last week that has led traders to raise their bets on U.S. rate hikes this year, and Fed Governor Michael Barr said on Tuesday that if inflation does not cool quickly, it will be time for the U.S. central bank to increase interest rates.
Fed funds futures traders are now pricing in 68% odds of a September rate hike, up from 35% before Warsh's comments on Friday.
Wall Street's major stock indexes fell and a global stock index was down as well.
The Dow Jones Industrial Average fell 208.81 points, or 0.39%, to 52,977.92, the S&P 500 fell 28.96 points, or 0.38%, to 7,657.18 and the Nasdaq Composite fell 161.21 points, or 0.61%, to 26,210.06.
MSCI's gauge of stocks across the globe fell 4.07 points, or 0.35%, to 1,145.15. The pan-European STOXX 600 index fell 0.62%. Hong Kong's Hang Seng dropped 1%.
The dollar strengthened amid the inflation worries.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro,rose 0.23% to 99.64, with the euro down 0.22% at $1.1591. Against the Japanese yen, the dollar strengthened 0.21% to 160.07.
U.S. August's jobs and consumer price inflation data, which are both due before the Fed's September 15-16 meeting, may now be key to whether the U.S. central bank hikes next month.
This Friday's jobs report is expected to show that employers added 56,000 jobs last month, according to the median estimate of economists polled by Reuters.
Spot gold fell 1.86% to $4,365.37 an ounce.
(Reporting by Caroline Valetkevitch in New York and Harry Robertson in London; Additional reporting by Satoshi Sugiyama in Tokyo and Tom Westbrook in Singapore; Editing by Hugh Lawson and Nick Zieminski)
