• Global markets are turning more cautious on Thursday as rising bond yields and renewed inflation concerns weigh on risk appetite. The U.S. dollar is holding near a two-month high after stronger-than-expected economic data reinforced expectations for further Federal Reserve tightening.
• U.S. Treasury yields are moving higher after a weak five-year Treasury auction. The five-year yield climbed above 5% for the first time since 2007, while investors are increasingly pricing in the possibility of another 25-basis-point rate hike next month.
• U.S. equities are facing pressure after Wall Street closed lower on Wednesday. The Nasdaq fell around 1.2%, while the S&P 500 declined around 0.6%. Higher yields are putting pressure on technology and growth stocks after the recent AI-driven rally pushed the Nasdaq to record levels.
• The Trump-Xi summit is the main geopolitical event of the day. Chinese President Xi Jinping is in Washington for talks with U.S. President Donald Trump, with the extension of the existing trade truce, AI regulation and broader trade relations among the key issues being watched by markets.
• European markets remain sensitive to both energy prices and the global bond sell-off. The DAX is facing pressure after German equities weakened in the previous session, while investors continue to monitor developments in the Middle East and the impact of higher energy costs on European inflation.
• Japan’s bond market is also coming under heavy pressure. The 10-year Japanese government bond yield jumped to around 3.06%, its highest level since 1996, after Tokyo markets reopened following a three-day holiday. The move is adding to concerns about global borrowing costs and keeping the yen in focus.
• Oil prices are easing from recent highs as markets assess potential progress in Middle East peace talks. However, geopolitical tensions remain elevated, meaning energy prices continue to pose a significant inflation risk for both the U.S. and Europe.

KEY MARKET THEME: BONDS + FED + TRUMP-XI SUMMIT

The focus is shifting from the recent AI-led equity rally toward the global bond market and monetary policy. Strong economic data, rising Treasury yields and renewed expectations for Fed rate hikes are creating a more challenging environment for the Nasdaq and other growth stocks. At the same time, the Trump-Xi meeting could provide a major catalyst for global markets, particularly for technology and trade-sensitive assets. In Japan, the sharp rise in government bond yields is becoming another important factor for the yen and broader Asian markets.