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Global markets grapple with rising yields, political shocks, and energy shifts
The 10-year US Treasury yield hit a seven-month high as markets brace for Trump-era inflation policies. South Korea’s political instability deepened, pushing the won to a 16-year low, while European natural gas prices rose amid doubts over Russian supply agreements.
10-year Treasury yield climbs, dollar poised for its best year since 2015.
Political turmoil sinks the won to a 16-year low; business sentiment plummets.
Gas futures rise as Russia-Ukraine transit deal remains uncertain.
Treasury yields climb as Dollar eyes best year since 2015
The 10-year US Treasury yield hovered near a seven-month high, reflecting anticipation for President-elect Donald Trump’s policies and their potential inflationary effects. This year-end move, driven by heightened demand for US bonds, underscores the market’s focus on Trump’s inauguration. The dollar index, on track for its strongest annual gain since 2015, ticked up amid subdued holiday trading marked by technical adjustments, short-covering, and profit-taking.
In Japan, the 10-year yield surged to its highest level since 2011 after Tokyo inflation accelerated for the second consecutive month. A summary of last week’s Bank of Japan (BOJ) policy meeting revealed that a January rate hike remains on the table, further bolstering hawkish expectations.
South Korea in political turmoil as Won hits 16-year low
South Korea’s political crisis deepened as parliament voted 192-0 to impeach Acting President Han Duck-soo. The move follows the suspension of President Yoon Suk Yeol, who is under scrutiny for a brief declaration of martial law earlier this month. The South Korean won plummeted past 1,480 per dollar, its weakest level in 16 years, reflecting heightened political and economic instability.
Finance Minister Choi Sang-mok vowed “decisive” measures to stabilize markets during an emergency meeting with the Bank of Korea Governor. Despite these assurances, business sentiment fell to its lowest level since July 2020, as economic challenges mount alongside looming tariff threats from the US.
European Gas prices rise amid uncertainty over Russian supply
European natural gas futures climbed 2% to €46.8 per megawatt-hour, the highest in three weeks, as Russian President Vladimir Putin cast doubt on extending a gas transit deal with Ukraine. The current agreement, expiring this year, has faced resistance from Ukrainian President Volodymyr Zelenskiy, who opposes any arrangement perceived as benefiting Russia during the ongoing conflict.
Putin highlighted logistical challenges in rerouting gas through countries like Hungary and Turkey, constrained by Gazprom’s long-term contracts. The potential loss of Ukrainian transit gas, which accounts for approximately 5% of European demand, could heighten reliance on Norwegian pipelines and US liquefied natural gas. Compounding the issue, European gas storage levels have dipped below 75%.
Putin emphasized that any new deal hinges on Ukraine’s Naftogaz dropping a lawsuit over unpaid transit fees, further clouding the outlook for Europe’s energy security as winter intensifies.
