Volkswacht Bodensee - Stocks retreat as bond yield fears persist, oil rises

Further increases in oil prices after a threat by Washington of "economic warfare" against Iran fanned inflation fears, which also weighed heavily on the dollar.

The more cautious stance by investors outweighed the relief sparked by the US Treasury vowing to buy back 30-year government bonds, an attempt to cap high yields that could threaten growth in the world's biggest economy.

The Treasury said it would "at least double" its sovereign bond buybacks after the 30-year yield surged to near two-decade highs on concerns over inflation, government borrowing and possible interest rate hikes.

The announcement jump-started Wall Street stocks on Wednesday and triggered a rebound on Asian markets, with technology stocks recovering from worries about rising borrowing costs for their massive AI spending.

But European stocks "didn't directly benefit as much from the US Treasury announcement, and were more exposed to the latest gain in energy prices," said Deutsche Bank's Jim Reid.

London, Paris and Frankfurt were all lower in midday trading Thursday, and Wall Street indices opened lower across the board.

Oil prices jumped around 2.5 percent as peace talks between the US and Iran remained stalled, with Tehran keeping the key Strait of Hormuz shut and Washington persisting with a naval counter-blockade of Iran.

US President Donald Trump pledged "economic warfare" against Tehran and threatened any country that trades with it, further dimming hopes of an imminent deal to end nearly six months of war in the Gulf.

In Asia, stocks rallied thanks to strong showings on Wednesday by market titans Apple, Microsoft and Amazon.

Seoul soared nearly six percent as chipmaker SK Hynix rocketed 12.7 percent, helped by the firm announcing a $29 billion share buyback, and Samsung climbed more than nine percent.

Tech firms also lifted Tokyo more than one percent higher, while Hong Kong and Shanghai were also well up.

"The key question now is whether the fall in yields can last," said City Index's Fiona Cincotta, referring to government bond yields that have soared across major Western economies in recent sessions.

"If oil prices remain elevated and concerns over US borrowing continue, pressure on the long end of the Treasury curve could return," she said.

Meanwhile, minutes from the Federal Reserve's July meeting showed that many policymakers believe higher interest rates will be necessary if inflation does not decline.

Eyes are now on next week's annual meeting of central bankers, economists and finance chiefs in Jackson Hole, Wyoming, where investors will be hoping for some idea about Fed boss Kevin Warsh's thinking on the outlook for rates.

"The unscheduled announcement yesterday was a clear indication of the Treasury’s discomfort with the recent sell-off" of longer-date US bonds, said Fawad Razaqzada, market analyst at FOREX.com.

But "Ultimately, a more structural solution -- particularly fiscal consolidation -- would be needed to deliver a sustainable improvement in the bond market," he said.

In company news, the founder of Chinese property giant Evergrande, Xu Jiayin, was jailed for life Thursday and the group fined more than $2 billion after a high-profile default in 2021.

Shares in the British sports retail group JD Sports plunged 14 percent in London after cutting its annual profit forecast, as it was hit by sluggish sales in North America.

- Key figures at around 1345 GMT -

Brent North Sea Crude: UP 2.2 percent at $93.78 per barrel

West Texas Intermediate: UP 2.3 percent at $86.67 per barrel

New York - DOW: DOWN 0.5 percent at 53,173.63 points

New York - S&P 500: DOWN 0.3 percent at 7,686.93

New York - Nasdaq: DOWN 0.6 percent at 26,167.02

London - FTSE 100: FLAT at 10,739.22

Paris - CAC 40: DOWN 0.6 percent at 8,455.54

Frankfurt - DAX: DOWN 0.5 percent at 25,955.00

Tokyo - Nikkei 225: UP 1.4 percent at 66,216.79 (close)

Hong Kong - Hang Seng Index: UP 0.8 percent at 25,698.49 (close)

Shanghai - Composite: UP 0.2 percent at 3,903.72 (close)

Euro/dollar: UP at $1.1680 from $1.1672 on Wednesday

Pound/dollar: UP at $1.3635 from $1.3605

Euro/pound: DOWN at 85.67 pence from 85.80 pence

Dollar/yen: DOWN at 158.76 yen from 158.27 yen

A.Kunz--VB