Global Markets Face Tech Selloff, Korean Equity Rout and Oil Volatility
Investors are navigating compounding shocks from steepening Treasury yields, divergent US technology earnings, and geopolitical oil volatility following reported US military strikes on Iran.
Global markets faced a complex mix of signals following the Federal Reserve’s decision to hold interest rates steady. The move triggered a steepening of the Treasury yield curve, with the 30-year yield jumping more than 10 basis points to its highest level since 2007 during the US session. A gauge of the dollar edged lower for a fifth consecutive day, while Brent crude dipped early Thursday after reports of US military air strikes on Iran.
In Asia, South Korea pledged additional measures to stabilize its stock market and curb retail access to leveraged exchange-traded funds. This intervention follows a severe rout that wiped billions of dollars from investor holdings, extending the Kospi Index’s monthly decline to a record 33 percent. The index managed to edge 0.8 percent higher on Thursday, supported by Samsung Electronics advancing on better-than-expected earnings, though SK Hynix slipped.
United States technology stocks presented a sharply divergent picture as a broader chip selloff deepened on Wall Street. A semiconductor gauge fell 5.3 percent, pushing the tech-heavy Nasdaq 100 into a technical correction, down 11 percent from its record high. However, Microsoft jumped over 8 percent in extended trading on strong cloud-computing growth, while Meta Platforms slid over 7 percent post-market on a disappointing revenue forecast, even as Wall Street futures climbed over 0.3 percent.
The bond market is absorbing the shock of the central bank’s latest policy stance. Torsten Slok, chief economist at Apollo Global Management, noted that the Fed’s abandonment of forward guidance is fueling historic bond market volatility. “There is very little to hang your head on in the markets,” Slok said, adding that it remains complicated to determine the basis of the Fed’s decision.
Energy markets remain highly sensitive to geopolitical escalation, with oil prices whipsawing throughout the month amid shifting diplomatic and military developments. The call skew for Brent crude, reflecting the premium for options betting on price gains, jumped to its highest level since late April. Reduced liquidity ahead of Friday’s expiry is further contributing to exaggerated price moves.
Analysts warn that the underlying geopolitical risks to global supply chains remain unresolved. RBC Capital Markets analysts, including Helima Croft, stated they are exceedingly skeptical of a major diplomatic breakthrough to resolve the nuclear standoff that initiated the conflict. “The ongoing threat of missiles, mines, drones, and Tehran tolls will keep a significant portion of the shipping market on the sidelines,” the analysts wrote.
