(Refiles to make clear that Trump promised to give money to every American adult in paragraph 1 not just Republican voters)
A look at the day ahead in European and global markets from Stella Qiu
Perhaps promising to borrow $1.3 trillion to give to every American adult if your party keeps control of Congress wasn't such a good idea. It may not have been the direct cause of the bond market's latest rout, but such fiscal extravagance at a time of rampant inflation sure didn't help.
Bond markets are putting governments everywhere on notice: if you want to keep on borrowing you're going to have to pay more. A lot more. The benchmark 10-year U.S. Treasury yield hit another three-year high of 4.9708% in Asia, closing in on the key 5% level that could disrupt the stock market and slow the economy.
Australian bond yields hit 15-year highs, New Zealand swap rates surged 22 basis points and even the Japanese benchmark government yield lifted 9 bps as traders bet central banks everywhere will need to hike to keep inflation from running wild.
Brent crude's storm back above $108 a barrel — now up more than 50% from its July lows — is the main culprit here. The Strait of Hormuz is still effectively shut and now the narrow Bab al-Mandab Strait at the southern end of the Red Sea is at risk of falling to Houthi control after they seized the Red Sea port city of Mokha.
That would force more shipments to reroute through the Suez Canal and around Africa, creating further logistical issues and adding weeks to Asian voyages. Imagine what that could do to oil prices.
Asian shares are deep in the red with Japan's Nikkei and South Korea's KOSPI off over 2%. European bourses should have a calmer open given yields there had already hit multi-decade highs overnight. Wall Street futures were little changed in Asia, awaiting the arrival of more liquidity.
All is now hanging on the U.S. CPI data, which is shaping up to have a hugely significant bearing on Federal Reserve policy, potentially sealing the case for an interest rate rise next week.
Forecasts are centred on a 0.2% monthly rise in the core measure of CPI, but the Fed decision could boil down to the second, or even third, decimal place in the figure. Futures now imply a 70% probability that the Fed will raise rates next Wednesday.
A hot result could easily send 10-year Treasury yields above the psychologically fraught 5% barrier. Somewhere, Donald Trump will be watching closely and not enjoying it one bit. There is little question that interest rates will be staying higher for longer, given the Gulf conflict looks set to drag on beyond the U.S. midterm elections, if not for years.
Key developments that could influence markets on Friday:
-- University of Michigan Consumer Sentiment report
-- U.K. industrial output, trade figures for July