World shares decline as bond market pressure persists, and Iran's rial sinks against the dollar

BANGKOK: World shares were mostly lower and oil prices slipped on Monday at the outset of a week capped by an annual meeting of top US economic officials at Jackson Hole, Wyoming.

Iran's currency hit a record low as the US prepared to announce new sanctions to try to break the impasse with Iran, adding pressure when its economy is already battered by earlier sanctions and a US naval blockade.

The rial dropped to 2.02 million to the US dollar on informal currency markets. Iran's official Central Bank rate stood at around 1.5 million rial to the dollar, but the informal rate is what most Iranians pay.

In early European trading, Germany's DAX edged 0.1 per cent lower to 26,110.79, while the CAC 40 in Paris also gave up 0.1 per cent, to 8,474.35. Britain's FTSE 100 inched up 0.1 per cent to 10,831.33.

The future for the S&P 500 was down 0.2 per cent, while that for the Dow Jones Industrial Average fell 0.1 per cent.

In Tokyo, the Nikkei 225 fell 0.7 per cent to 65,528.09, while South Korea's Kospi lost 3.1 per cent to 6,696.96.

The Hang Seng in Hong Kong declined 1.9 per cent to 25,517.33 and the Shanghai Composite index gave up 0.6 per cent to 3,882.01.

Australia's S&P/ASX 200 gained 0.5 per cent to 9,103.10, bucking the regional trend.

Taiwan's Taiex fell 1 per cent.

Investors will get an important inflation update on Wednesday when the US releases its report on personal consumption expenditures, or PCE, for July. It is the Federal Reserve's preferred measure of inflation. Much like the consumer price index, it has shown that the rate of US consumer inflation remains stubbornly above 3 per cent.

The Fed has been struggling to get inflation back to its target rate of 2 per cent. Inflation has crept higher after the US imposed a wide range of tariffs globally. It has climbed further as the Iran war slowed global oil shipments from the Strait of Hormuz.

Last week, rising bond yields forced the US Treasury Department into an unusual intervention and raised the spectre of higher borrowing costs weighing on consumer spending, the lifeblood of the economy. It also sparked concerns that investors baulk at financing a seemingly endless flow of government borrowing.

The bond markets got only temporary relief from Bessent's announcement that the government would double its buybacks of longer-term bonds. That was meant to bring down the 10-year Treasury yield and lower mortgages. The 10-year yield rose back to 4.73 per cent Friday, matching its highest point in more than a year. It was at 4.71 per cent early Monday.

The 30-year Treasury yield, which the Fed is also targeting with its bond repurchases, also rose and is near its highest level since 2007.

Higher yields can slow the economy and undercut prices for all kinds of investments.

The bond market has remained jumpy, and investors will be watching for signals from Federal Reserve Gov. Kevin Warsh regarding rates and other policies in a key speech at the annual gathering of US economic leaders in Jackson Hole later this week.

On Friday, the S&P 500 rose 0.4 per cent for just its second gain in the six days since setting its all-time high last week. The Dow industrials jumped 1 per cent and the Nasdaq composite climbed 0.4 per cent.

Most US companies have reported bigger profits for the spring than analysts expected, helping push stocks to records since share prices tend to follow the path of corporate profits over the long term.

Uncertainty about when the war with Iran will allow oil tankers to freely exit the Persian Gulf again has roiled markets, causing oil prices to rise and pushing up Treasury yields due to worries over inflation.

The outlook remained murky early Monday. The new head of Iran's top security body warned Sunday that Tehran will see any country's support for new US economic measures against the Islamic Republic as an “act of war,” while Iran's president defended a memorandum of understanding with the United States as the best way out of the stalled conflict.

Early Monday, the price for a barrel of Brent crude oil was 1.1 per cent lower at USD 93.32. US benchmark crude fell 1.8 per cent to USD 85.52 per barrel.

The US dollar bought 159.27 Japanese yen, up from 158.94 yen late Friday. The euro fell to USD 1.1662 from USD 1.1678.