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A look at the day ahead in European and global markets

By Kevin Buckland, Correspondent

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The “higher for longer” rates mantra continues to reverberate around markets, a week on from the Fed’s surprise hawkish tilt.

Long-term Treasury yields, traditionally subdued in Asian hours, spiked to a fresh 16-year peak , keeping the dollar close to multi-month tops to G-3 rivals the euro, pound sterling and yen.

An eagle tops the U.S. Federal Reserve building’s facade in Washington, July 31, 2013. REUTERS/Jonathan Ernst/File Photo

Angst over tighter financial conditions pulled down Asia Pacific stocks as well, overshadowing Wall Street’s overnight rally and sounding a warning for European equities.

Japan’s Nikkei lost as much as 1%, while Hong Kong’s Hang Seng slid 0.85%.

China’s property market problems continue to fester. Bloomberg reports that a unit of embattled developer Evergrande – the poster child of the sector’s woes – has missed payments on some onshore bonds.

Investor jitters were evident in the underperformance of the Hang Seng’s property index, down a resounding 1.9%.

There’s more reason for nerves as the quarter closes with a U.S. government shutdown looming for Oct. 1. Moody’s has upped the stakes with a stern warning that potentially puts the country’s last triple-A rating on the line.

Investors were already biting their nails over a glut in supply, as another heavy Treasury auction run kicks off on Tuesday with a sale of two-year notes, followed by three-year notes on Wednesday and seven-year paper on Thursday.

It comes as the U.S. budget deficit continues to widen on higher spending and falling tax receipts.

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