Global stocks fell on Tuesday as US bond yields surged to 16-year highs amid fresh concerns that the Federal Reserve will need to keep interest rates higher for longer.
Treasury yields soared after new data showed that the US jobs market remains remarkably resilient in the face of spiralling interest rates.
The number of US job openings unexpectedly increased from 8.9m in July to 9.6m in August, according to the Bureau of Labour Statistics’ Job Openings and Labour Turnover Survey, known as JOLTS.
This is much higher than economists’ predictions that job openings would remain flat.
It fuelled investor concerns that the Federal Reserve will need to keep interest rates elevated as it battles to control inflation.
The figures sparked a sell-off in the global bond market which pushed 10-year and 30-year yields to their highest levels since 2007, with the longer-term Treasury trading above 4.9pc.
It came as the average 30-year fixed mortgage rate jumped to 7.72pc on Tuesday, reaching levels not seen since the end of 2000.
The surge in US government borrowing costs weighed down on stock markets across the world.
In the US, the Dow Jones Industrial Average shed 430 points or 1.3pc to close at 33,002.38, its biggest one-day decline since March.
The broad-based S&P 500 dropped 1.4pc to 4,229.45, and the tech-heavy Nasdaq Composite index fell 1.9pc to 13,059.47.
Equity markets also tumbled across Europe. The UK’s internationally-focused FTSE 100 index ended 0.54pc lower at 7,470.16. The Euro Stoxx 50, which represents blue-chip companies across the eurozone, finished 1.02pc lower.
Traders will be paying close attention to any signs of cooling in Friday’s non-farms payroll (NFP) report, a monthly measure of US workers in manufacturing, construction and goods.
“Unless the NFP report comes in lower than expected, Wall Street will likely start to fully price in at least one more Fed rate hike before the end of the year,” Ed Moya, senior market analyst for the Americas at Oanda, told Bloomberg.
It came after Federal Reserve officials earlier this week called for higher interest rates to fight persistent inflation.
Michelle Bowman, a Federal Reserve governor, said in a speech Monday that she expects it will likely be appropriate “to raise rates further and hold them at a restrictive level for some time”.
Elsewhere Michael Barr, the Federal Reserve’s vice chair for supervision, also predicted that interest rates will need to remain elevated for “some time”.
He said: “The most important question at this point is not whether an additional rate increase is needed this year or not, but rather how long we will need to hold rates at a sufficiently restrictive level to achieve our goals.”
Last month, the Federal Reserve left interest rates unchanged at the target range of 5.25pc to 5.50pc, but indicated the possibility of a further increase this year.