The main story driving markets today is the surge in US Treasury yields to its highest level since 2011. Rising yields tend to hurt stocks in two ways. First, investors shift money over to US Treasuries to profit from the higher yield.
Second, rising Treasury yields also translate to higher interest rates. This hurts investors who use margin debt to fund their trading.
On top of that, Asian investors are also growing increasingly worried that the US-China trade war will spin out of control. Most economists think that President Trump will focus on China after forcing Canada, Mexico, and South Korea into revised trade deals. However, the Chinese negotiations are likely to be a lot more fraught and could lead to disruptions in the global supply chain.
Accordingly, Asian stocks started the day down for the most part. A couple of the notable moves across Asia today:
- Japan’s NIKKEI 500 Index moved down 0.82%;
- The Shanghai Composite Index was closed for a national holiday;
- Hong Kong’s Hang Seng Index plummeted 1.69%;
- South Korea’s KOSPI Index is down 1.52%;
- India’s SENSEX fell 1.80%.
European stock markets are falling at the open today. A look at some of Europe’s top indices shows:
- London’s FTSE Index is down 0.26%
- The German DAX Index dropped 0.10%;
- The FTSE Italia All Shares Index is trading sideways;
- The French CAC 40 Index fell 0.26% at the open.
European stock markets will continue to focus on issues within their own markets such as the Brexit negotiations and the Turkish Lira Crisis. Additionally, European investors are keeping a close eye on developments in Italy as investors have become fearful of potential anti-EU measures by the new government.
US Futures Are Trading Lower in Pre-Market Action
The U.S. stock market is moving strongly lower in pre-market trading. Indeed, the NASDAQ and the S&P 500 futures are down 0.56% and 0.47%, respectively.
Investors will continue to take their cues from the news cycle heading. Accordingly, any new developments in the Trump legal morass or global trade disputes could see it drive markets in either direction.