Summer of angst as bond yields surge and global stocks wobble

investing.com:

(Reuters) — Cracks are forming in a global stocks rally, with surging bond yields, rising energy prices and intensified worries over China’s economy among the factors sapping investors’ risk appetite following months of gains in equity markets.

The MSCI All Country World Index is down nearly 6% from its recent highs, though still up 10% for the year. The S&P 500 is down about 5% this month, as is Europe's STOXX 600. Japan’s Nikkei has slid just over 5%.

Here are five corners of the market investors are paying particularly close to attention to:

One key worry for investors is a surge in bond yields that has come as signs of stronger-than-expected growth in parts of the global economy fuel bets on central banks leaving interest rates at current levels for longer than expected.

Yields on the benchmark U.S. 10-year Treasury hit their highest since October on Thursday. Meanwhile, U.S. real yields, which show what investors can expect to earn on government bonds after adjusting for inflation, stand near their highest point since 2009.

Yields in other economies have also pulled higher. Britain’s 10-year real yield, for instance, on Thursday rose to its highest since last October.

One worry is that higher yields on Treasuries and other government bonds will make stocks less attractive at a time when valuations have ballooned in many countries.

Benchmark yields also guide other key economic rates, raising the cost of capital as they climb. U.S. mortgage rates surged this month, with the popular 30-year fixed rate hitting the highest level in more than 21 years, further complicating the housing market outlook.

Rising yields have also supported the dollar, which is up about 4% from its recent lows against a basket of currencies.