Asian stocks extend global rout; bonds hammered as war drags on

Citi analysts said more severe scenarios of the Middle East conflict could drag global growth below 2 per cent this year, push headline inflation beyond 4 per cent and stoke recession risk.

“Asia, particularly Korea, Japan, and India, faces the most intense headwinds due to heavy reliance on imported fuel and direct exposure to disruptions in the Strait of Hormuz,” they said in a client note.

GLOBAL BOND YIELDS SURGE

Norway’s Norges Bank was the latest central bank to flag inflation risk and interest rate hikes ahead as the war rages on. 

Having held policy steady on Thursday, the bank said it expected to raise rates this year, a stark contrast with its earlier forecast of three cuts by the end of 2028.

Global bond yields jumped anew after the climb in oil prices amplified inflation concerns. 

Japan’s 10-year yields rose 4 basis points to 2.31 per cent, while Australia’s benchmark 10-year yields surged 7 bps to 5.076 per cent.

The two-year US Treasury yield held steady at 3.9714 per cent on Friday, having jumped 10 basis points overnight as traders priced in more risk of a rate rise from the US Federal Reserve this year, which is about 50 per cent priced in.