Wall Street opens lower on uncertainty over rate hikes
Reuters: U.S. stocks opened lower on Tuesday as uncertainty loomed over the Federal Reserve’s path for interest rate hikes.
- The Dow Jones industrial average .DJI fell 54.71 points, or 0.31 percent, to 17,682.29
- the S&P 500 .SPX lost 8.72 points, or 0.42 percent, to 2,057.41 and
- the Nasdaq composite.IXIC dropped 35.01 points, or 0.72 percent, to 4,856.78.
It all started in Japan, where the yen jumped to a 17-month high and government bonds climbed as increasing concern that global economic growth is faltering stoked demand for haven assets.
Additionally, the Yan overnight appreciated even after Bank of Japan Governor Haruhiko Kuroda said he will keep monitoring foreign-exchange markets and reiterated the potential for additional monetary stimulus.
According to FX watchers the critical USDJPY carry pair may test a break of 110.
The surge in the Yen pushed Japan’s closely correlated Nikkei another 2.4% lower to 15,732 as it rapidly approaches its February 12 lows of 14,952.
It wasn’t just Japan and the Yen: in Germany bunds climbed after an unexpected drop in factory orders (down -1.2%, exp. 0.3%), with Bund yields sliding below 0.1% (0.07% to be precise).
“There are worries about the global economy,” Christian Reicherter, an analyst at DZ Bank AG in Frankfurt told Bloomberg. “In this environment, bunds are still the place to go”, and indeed, the chart below confirms just that.
As a result, stocks fell around the world, along with emerging-market currencies. All 30 stocks in Germany’s DAX Index fell after an unexpected drop in factory orders.
The Stoxx Europe 600 Index sank to a five-week low and U.S. equity futures pointed to a second day of losses.
Gold advanced the most in a week, and oil dropped for a third day before stockpiles data.
- S&P 500 futures down 0.9% to 2040
- Stoxx 600 down 1.9% to 329
- FTSE 100 down 1.4% to 6081
- DAX down 2.4% to 9583
- German 10Yr yield down 4bps to 0.09%
- Italian 10Yr yield down 1bp to 1.23%
- Spanish 10Yr yield down less than 1bp to 1.46%
- S&P GSCI Index down 0.2% to 310.8
- MSCI Asia Pacific down 1.6% to 124
- Nikkei 225 down 2.4% to 15733
- Hang Seng down 1.6% to 20177
- Shanghai Composite up 1.4% to 3053
- S&P/ASX 200 down 1.4% to 4924
- US 10-yr yield down 4bps to 1.72%
- Dollar Index up 0.11% to 94.62
- WTI Crude futures down 0.3% to $35.59
- Brent Futures down 0.3% to $37.59
- Gold spot up 1.5% to $1,233
- Silver spot up 1.6% to $15.16
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In Europe, risk off sentiments dominates price action in Europe with the Eurostoxx (-2%) hit by the slump in mining and energy names.
- Financials have also underperformed so far today in the wake of the Panama Papers scandal, with Credit Suisse lower by 3.5%.
- Sentiment has also been dampened from the lacklustre PMI readings from European nations with the French services reading slipping into contractionary territory, while Germany also posted softer than expected factory orders.
- Bunds gained on the back of flight-to-quality flow to make a firm break above 164.00 with the yield curve continuing its bull-flattening bias. As such, yields broke below 0.10% having fallen to its lowest level in a year.
- German Factory Orders Unexpectedly Fall on Exports Slowdown: orders fall 1.2% on month vs estimate of 0.3% increase; Feb. decline led by sluggish growth in global trade; German Growth at Risk Amid Global Economic Slowdown: OECD
- Euro Area Growth Stays ‘Sluggish’ as Markit Index Revised Lower: euro-area economy grew slower than initially anticipated at the end of 1Q, according to Markit Economics, which revised down a key index of activity
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