Asian Stocks Slump Amid Bond Market Woes and Inflation Fears

Asian stock markets were mostly lower on Monday as concerns over bond market pressure and inflation weighed on investors' minds. In Tokyo, the Nikkei 225 fell 0.5% to 65,678.45, while South Korea's Kospi lost 3.5% to 6,664.36. The Hang Seng in Hong Kong declined 2.1% to 25,465.23 and the Shanghai Composite index gave up 0.7% to 3,877.30.

Australia bucked the regional trend with its S&P/ASX 200 gaining 0.5% to 9,107.40. Taiwan's Taiex also fell 0.5%. Investors are bracing for an important inflation update on Wednesday when the U.S. releases its personal consumption expenditures (PCE) data for July.

The PCE is the Federal Reserve's preferred measure of inflation, and it has been stubbornly above 3% in recent months. The Fed has been struggling to bring inflation back down to its target rate of 2%, which was achieved briefly in early 2025 before tariffs imposed by the U.S. drove prices higher.

Last week, rising bond yields forced the Treasury Department into an unusual intervention, sparking concerns about higher borrowing costs and their impact on consumer spending. The 10-year Treasury yield rose back to 4.73% on Friday, matching its highest point in more than a year.