European stocks and the euro dropped on Wednesday as oil prices rose above $100 amid renewed Middle East tensions while fiscal concerns continued to weigh on sentiment.
MSCI's main world stocks index fell 0.28 percent, while Europe's STOXX 600 was down 0.45 percent.
Nasdaq futures fell 0.11 percent while S&P 500 futures were roughly unchanged. The S&P 500 hit a fresh record on Tuesday, up about 0.6 percent on the day, while the tech-heavy Nasdaq gained 0.4 percent to also mark an all-time high. The Dow Jones Industrial Average rose 0.5 percent.
MSCI's broadest index of Asia-Pacific shares excluding Japan was down 0.5 percent. The index is up 0.9 percent so far this month.
“In the very early stages of the fourth quarter, typically the best quarter of the year for equity returns, markets are being driven by a confusing ‘stocks up, US breadth down, yields up, oil down and up, and down’ narrative,” said Jeremy Batstone-Carr, an economist at Raymond James.
Brent crude rose 1 percent to $101.58 per barrel as the market weighed supply constraints from a storm heading for US oil-producing regions and attacks by Yemen's Houthis on Saudi Arabia.
The French yield spread versus safe-haven German Bunds — a market gauge of the risk premium investors demand to hold French debt — was wider after narrowing for two days. It was last at 131 bps, and reached almost 160 bps last week.
French bonds have been under pressure as expectations of higher European Central Bank rates and political uncertainty before the 2027 election raise doubts over France's ability to fix its finances.
"The magnitude of the move is striking given the 2027 election remains several months away and France's deteriorating fiscal dynamics are hardly new," said Laura Cooper, Nuveen's head of macro credit and global investment strategist.
"What has changed is sharply higher yields, leaving investors less willing to look through those vulnerabilities."
The rekindling of investor concerns weighed on the euro, which slipped 0.47 percent to $1.1208. It slid to a 17-month low against the dollar at $1.1161 earlier this week.
Wider yield spreads in the euro area weigh on the single currency by boosting expectations of European Central Bank monetary easing, reviving worries about fiscal sustainability and stoking fears of increasing fragmentation in the euro area.
US Treasury auctions
The yield on the US 10-year Treasury bond was up 3.8 bps at 5.307 percent.
Market participants will closely watch a 10-year Treasury bond auction later in the day and a 30-year auction on Thursday, which will show the depth of investor demand for US debt, analysts said.
US longer-dated yields hit a 24-year high on Monday amid a persistent selloff since late August due to inflation and the fiscal outlook.
The dollar index, which measures the greenback against a basket of currencies, rose 0.33 percent to 102.18 following a 0.27 percent slide in the prior session.
The Japanese yen weakened 0.1 percent to 158.30 per dollar. Sterling dipped 0.2 percent to $1.3228.
The Federal Reserve on Wednesday will publish the minutes of its Sept 15-16 policy meeting, which will be scrutinized for potential rate moves over the next few months.
Traders scaled back expectations of a Fed rate increase this month to 19 percent from about 50 percent a week earlier.
Spot gold was down 0.6 percent at $4,135.28 per ounce.
