Trading groups have gone quiet. Today, markets across Asia and China's A-shares are experiencing significant declines, a move that was largely foreshadowed by Wall Street's performance in the early hours of the morning. The usual chatter and excitement in stock trading chats have been replaced by silence, with investors quietly focusing on their day jobs, hoping to earn more to average down their positions.

On September 2nd, the market experienced a full-day adjustment, with all three major indices falling. By the close, the Shanghai Composite Index was down 0.97%, the Shenzhen Component Index fell 1.88%, and the ChiNext Index dropped 2.39%. Across the market, 1,541 stocks rose with 54 hitting the daily limit, while 3,901 stocks declined. The defense sector bucked the trend, with stocks like Shengnan Technology, Neimeng First Machine, Jianshe Industry, and Changcheng Jun Gong hitting their daily limits. Liquid cooling concept stocks remained active, with Jindi Shares, Xueren Group, and Feilong Co. also hitting limit-up. The previously strong agricultural sector saw a collective pullback, with Dunhuang Seed and Guotou Fengle hitting limit-down. Coal, film and television, and securities sectors led the declines. When the market lacks a clear direction and overall sentiment is weak, funds often speculate on small-cap and poor-performing stocks, with the Beijing Stock Exchange 50 Index at one point surging over 4%.

In Asian markets, South Korea's stock market fell about 4%, while Japan's Nikkei 225 dropped nearly 3%.

Let's analyze the reasons behind the market downturn. The primary factor is the impact of overseas markets. The escalation of conflict in the Middle East has pushed oil prices higher, reigniting concerns about inflation and reinforcing expectations of tighter monetary policy, leading to a synchronized decline in global stocks and gold. Overnight, during U.S. trading hours, the market appeared to be staging a deep 'V-shaped' recovery, but soon after, missiles were launched towards Iran, causing the market to plunge and thereby affecting Asian markets today.

The surge in energy prices has further pressured the bond market, pushing global bond yields to their highest levels since 2008. This new spike in energy costs is exacerbating concerns about inflation stemming from U.S. government spending and the massive financing needs for corporate AI infrastructure buildouts. Currently, traders see a greater than 50% probability of rate hikes by four major central banks this month. Investors are now evaluating whether persistently rising oil prices and bond yields will intensify pressure on stocks and other assets.

Analysts note that the rise in global bond yields has become the core theme in financial markets this week. Higher global yields are detrimental to both economic growth and corporate earnings. Therefore, with bond yields spiraling out of control, it is difficult to imagine risk assets rising comfortably in tandem.

Meanwhile, the U.S. military stated that the latest round of airstrikes against Iran has concluded, but Iran has claimed to have launched missile attacks on a U.S. air base in Jordan. After several weeks of relative calm between the U.S. and Iran, during which the administration shifted from direct military action to economic pressure on Tehran, the renewed escalation of tensions is adding to the pressure on Wall Street, while the global bond sell-off intensifies.

Federal Reserve Chair Kevin Warsh's speech at Jackson Hole last week also strengthened market expectations for further monetary policy tightening. The market now prices in approximately a 70% probability of a Fed rate hike in September. For the Reserve Bank of Australia, the probability of a hike on September 29th is around 65%, and a rate hike by the Bank of Japan on September 18th is fully priced in.

Analysts point out that bond yields were already rising, and the renewed military conflict between the U.S. and Iran, along with the resulting oil price increase, has made investors even more concerned about the bond market. At current yield levels, high interest rates are clearly a headwind for Asian stock markets, particularly putting greater pressure on longer-duration technology stocks.