Global markets reeled as a severe artificial intelligence tech rout erased early gains, driving the benchmark 10-year US Treasury yield down more than 19 basis points—its largest daily drop since March 2023—as investors fled to sovereign bonds and safe-haven currencies, Reuters reported.
Tech Rout Triggers Treasury Surge and Rate Shift
Fears regarding the massive capital expenditure and funding needs of artificial intelligence hammered technology shares across Wall Street and Asia. Reuters reported that Meta shares slumped nearly 8% after the Facebook parent posted its first cash outflow in over a decade due to AI expenditures and announced plans for a two-for-one stock split to raise capital. Tesla shares dropped 3.1% following a cut to its 2026 capital spending plans.
As equities tumbled, capital rushed into sovereign debt. The benchmark 10-year US Treasury yield slid below the closely watched 5% threshold to settle at 4.9591%, according to Reuters data. The sudden market reset forced investors to reprice Federal Reserve policy expectations. Markets stripped out almost a full quarter-point rate hike for the coming year, reducing the implied probability of a December rate increase to 85%.
Asian Stock Markets Face Broad Declines
Asian equities absorbed heavy losses as the regional tech sell-off deepened. MSCI’s broadest index of Asia-Pacific shares excluding Japan fell 0.3%, cementing a fourth straight week in the red with a 2.7% weekly loss, Reuters reported. Japan’s Nikkei dropped 1.3%, bringing its weekly decline to 5%.
South Korea’s Kospi slid 1.7% on course for a 4.3% weekly drop, dragged down by memory chipmaker SK Hynix, which fell 2.5%. In mainland China, an index of blue chips lost 1.1% to reach its lowest level since July 2025, leaving the index down roughly 20% from its late-June peak. Meanwhile, Hong Kong’s Hang Seng edged up 0.1% following a 3% drop the previous day, and Taiwan’s markets closed entirely due to a typhoon.
Energy Pressures Complicate Global Sentiment
Despite the equities downturn, elevated oil prices kept market sentiment cautious. Brent crude reached a five-month peak of $114 a barrel, driven by Houthi attacks in Saudi Arabia that amplified concerns over potential Middle East supply disruptions, Reuters reported. Safe-haven currencies gained ground as the dollar slipped 0.2% to 156.44 yen following an overnight slump, and fell against the Swiss franc to its lowest level in a month.
“AI is under the cosh,” Charlie McElligott, managing director for cross-asset strategy at Nomura Securities International in New York, wrote in a note cited by Reuters. “US Treasury bonds are—gasp—working as your hedge again, as the market seems to be real-time repricing the probabilities of a US growth scare off the back of the AI reset.”
Common Questions About the Market Turmoil
Why did US Treasury yields drop so sharply?
The benchmark 10-year US Treasury yield fell more than 19 basis points—the largest single-day drop since March 2023—as investors fled riskier equities and poured capital into sovereign bonds during the technology sector sell-off, according to Reuters.
How are global central bank rate expectations affected?
Markets pared back Federal Reserve policy tightening expectations by stripping out nearly a full quarter-point rate hike for the following year, lowering the implied probability of a December rate rise to 85%, Reuters reported.
What drove Brent crude prices to a five-month high?
Brent crude hit $114 a barrel amid escalating geopolitical tensions in the Middle East, including Houthi attacks in Saudi Arabia that sparked supply disruption fears, according to Reuters.
Monitors Monitor Upcoming Midterm Elections for Volatility
Market participants continue to monitor the approaching US midterm elections as a potential catalyst for further financial volatility, alongside ongoing fiscal deficit and inflation figures, ING’s regional head of research for the Americas Padhraic Garvey told Reuters. Analysts note that stabilization in risk assets remains a prerequisite before yields attempt to retest the 5% threshold.
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