Asian Markets Selloff Expected as Fed Hike Bets Reignited
Asian markets are bracing for a selloff as rising energy costs and resilient US economic data have revived bets on aggressive Federal Reserve tightening. The surge in oil prices has added fuel to the inflation narrative, with Brent crude jumping 3.9% to settle at $103.08 a barrel.
The Treasury market bore the brunt of the repricing, with the 10-year yield surging 15 basis points to 5.11%, its biggest one-day increase since Trump's April 2025 tariff rollout. The sell-off deepened after a weak $70 billion auction of five-year notes, pushing that tenor's yield above 5% for the first time since 2007.
US economic data released Wednesday showed that the S&P Global flash US composite purchasing managers index rose to its highest since July 2021, signaling faster growth in business activity. The manufacturing PMI increased to 57 from 53.9 in August, marking the greatest improvement in manufacturing business conditions since May 2022.
Fed officials raised borrowing costs last week for the first time in three years, lifting the target range to 3.75 to 4%. Chairman Kevin Warsh described the move as removing a 'dose of accommodation.'