On the first day of the new quarter, global markets diverged sharply — Asian equities closed strongly higher on the back of Micron Technology (NASDAQ: MU) earnings, but sentiment shifted dramatically during the European session as the global bond selloff escalated, European stocks fell sharply, and US equity futures trimmed gains substantially.

In Asian markets, Japan's Nikkei 225 closed up 2,203.00 points, or 3.30%, at 68,956.72, with Kioxia and Tokyo Electron each gaining about 6%, SoftBank Group up nearly 4%, and technology stocks leading gains across the board. South Korea's KOSPI closed up 133.32 points, or 1.95%, at 6,971.36, rebounding strongly after briefly falling more than 1% intraday. Australia's ASX 200 bucked the trend, declining 1.8%.

But as European trading hours began, market sentiment shifted markedly. The US 10-year Treasury yield rose to 5.33%, the highest since 2002, surpassing its 2007 peak; the 30-year yield also hit a fresh 2002 high. The spread between French and German 10-year yields widened by 4 basis points to 131 basis points, with France's budget problems remaining a market focal point. Mark Cudmore, managing editor of Bloomberg's MLIV, noted: "France is at the epicenter of the global bond turmoil, and Thursday's budget disclosure could make the situation worse."

Subsequently, European stock losses widened, with the UK's FTSE 100 falling 2%, its largest decline since May. The pan-European Stoxx 600 extended losses to 1.6%, hitting a new intraday low. US equity futures saw gains sharply pared back — Nasdaq futures fell from an early gain of more than 1% to just 0.46%, S&P 500 futures gave back nearly all gains, and Dow futures turned negative, down 0.54%.

In US pre-market trading, optical communication stocks rose broadly, with Lumentum up 1.72% and Corning up 1.46%.

In precious metals, gold, which had been under pressure, stabilized somewhat, with spot gold recovering to around $4,190 per ounce, up about 0.8%; silver also rebounded about 1.2%.

PCE Inflation Data and Micron Earnings Shake Markets

The key events on Wednesday were the PCE inflation data and Micron's earnings.

The US core PCE price index (excluding food and energy) rose just 0.2%, below expectations, with the prior month's figure also revised down. Meanwhile, consumer spending growth was the fastest in over a year.

Chris Osmond, chief investment officer at Fifth Third Wealth Advisors, called the data set a "Goldilocks combination."

Second-quarter growth was stronger than expected, consumer spending was more robust, the September labor market rebounded sharply, and the Fed's preferred inflation gauge also came in well below expectations. The net effect was broadly positive for risk assets, significantly reducing the probability of an October rate hike while keeping a fourth-quarter hike still on the table.

Money markets currently price the probability of a Fed October rate hike at below 40%.

On the technology front, Micron's earnings boosted the AI theme.

Overnight, Micron reported fourth-quarter revenue of $54.229 billion, up 379% year-over-year and 31% quarter-over-quarter, beating market expectations of $51.49 billion. It guided first-quarter fiscal 2027 revenue at a midpoint of $61.5 billion, above market expectations of $57.02 billion; gross margin of approximately 86.25% was also below market expectations of 86.7%. The CFO said price increases would moderate. The CEO said demand has strengthened further since the last earnings report and expects supply-demand conditions in 2027 and 2028 to be significantly tighter than in 2026.

Micron gave an optimistic business outlook but also warned that rising compensation costs would compress margins. Bloomberg strategist Mark Cranfield believes Asian markets will selectively digest the news: "Investors appear to be choosing to ignore the margin risk warnings and focus instead on the demand prospects from the AI buildout boom."

In addition, Alphabet (NASDAQ: GOOGL) shares rose after Google began rolling out its flagship AI model Gemini 4 Argon.

Bond Market Posts Worst Quarterly Performance as "Triple Pressure" Persists

Global government bonds have just experienced their worst quarter since 2024. The US 30-year Treasury yield climbed again, hitting its highest level since 2002. The 10-year yield touched an intraday high of 5.30% during New York trading.

The US 10-year Treasury yield rose to 5.33%, the highest since 2002, surpassing its 2007 peak; the 30-year yield also hit a fresh 2002 high. The UK 30-year gilt yield rose above 6% for the first time since 1998, up 5 basis points, with the last time it touched this level being March 1998. Bloomberg noted that the rise in UK gilts was part of a global government bond selloff driven by escalating Middle East tensions pushing oil and gas prices higher.

Australia's 10-year yield rose 4 basis points to 5.39%, while Japan's 10-year yield rose 5 basis points to 3.10%.

Jimmy Louca, senior portfolio manager at Australian Retirement Trust, directly identified the problem:

The bond market is facing a triple blow — massive government spending, strong growth, and geopolitical supply shocks. We have already entered a reflation regime, and the market is still pricing this in too slowly.

Oil Rebounds, Dollar Hits Three-Month High

WTI crude oil extended its intraday gain to 1.0% during the European session, reaching $91.38 per barrel, after briefly weakening to around $89 in early Asian trading. Sustained high oil prices support inflation expectations, further intensifying bond market pressure.

On the currency front, the US dollar index broke above its July high, rising to 101.66 at one point, the highest since late June, marking a fourth consecutive day of gains. The yen fell 0.6% to 158.31 per dollar, underperforming all G10 currencies, as the Bank of Japan's opinion summary failed to provide signals of faster tightening, disappointing the market. The euro fell 0.1% against the pound to 0.85309, hitting its lowest since July 24. The offshore yuan was roughly flat at 6.7155.

On the currency front, the dollar completed its strongest monthly performance since March. The yen weakened slightly after the Bank of Japan released its opinion summary, falling 0.3% to 157.88 per dollar. The offshore yuan was roughly flat at 6.7094.