Global Stocks, Bonds Rebound as Rate Hike Expectations Grow

Global stocks and bonds staged a comeback on Thursday, buoyed by growing expectations that the Federal Reserve will raise interest rates later this month. The recovery in bond markets helped lift sentiment in equities, while the yen surged towards its biggest two-day gain since an official intervention in early August.

Oil prices reversed earlier losses to trade above $95 a barrel, as investors remained on edge following renewed military tensions between the U.S. and Iran. In contrast, gold rose 1.1% to $4,434 an ounce, its highest price in nearly seven months.

Investors are now focused on Friday's U.S. payrolls report, which could provide further insight into the labor market and inform the Fed's monetary policy decision. Meanwhile, Money markets currently assign a roughly 60% chance of a rate hike from the Fed this month, up from less than 40% a week ago.

Lombard Odier chief economist Samy Chaar suggested that rising long-term bond yields may be driven by strong nominal growth rather than inflation fears. He noted that if demand is high and keeping yields at elevated levels, it could be a positive environment for multi-asset portfolios.