European Session: Yields Jump, Oil Surges, Stocks Slide

Markets:

• 10-year Treasury yields rose six basis points to 5.345%.
• WTI crude climbed 4.1% to $92.60.
• The US dollar led while the Australian dollar lagged.
• Gold added 0.2% to $4,121.
• European stocks declined; S&P 500 futures fell 0.6%.
• Bitcoin dropped 1% to $82,451.

Investors are once again contending with a familiar narrative in European morning trade today.

Bond market pressure persists, creating a more negative risk environment and supporting the greenback. Meanwhile, rising oil prices are stoking the "higher for longer" interest rate narrative due to ongoing inflation concerns.

Long-end Treasury yields remain the focus, with the 10-year climbing above 5.34% following a temporary decline late in US trading the previous day. The 30-year yield holds near multi-decade peaks above 5.70%. This extends the week's trend, as yields stay supported by factors including concerns about the US fiscal outlook and inflation uncertainty, prompting investors to seek a higher premium for long-term bonds.

European bond markets are also under strain, with French 10-year yields jumping to 4.94% and German 10-year yields edging up to 3.52%. France's fiscal challenges risk spilling over to the broader region, keeping bond markets on alert.

Adding to the turmoil, oil prices are rallying sharply on the day. WTI crude has surged over 4% to $92.60, further fueling inflation fears.

Consequently, risk appetite is dampened by today's developments. The DAX has fallen over 1%, and the CAC 40 is seeing comparable declines. US futures are also lower, with S&P 500 futures down 0.6% and Nasdaq futures off 0.8%, as rising yields weigh on equity valuations amid tighter financial conditions.

In currency markets, the dollar is again gaining from higher Treasury yields. EUR/USD has slipped 0.2% to 1.1175 after a short recovery this week above 1.1200, while USD/JPY has risen 0.2% to 158.27 on the session.

Looking ahead, the focus will be on the US weekly initial jobless claims, which will test whether the soft jobs report last week is translating into Q4 layoffs.