The US economy grew in Q4 slightly faster than first estimated but slower than expected
Wall Street stocks plunged overnight amid a broad sell-off due to rising bond yields. The 10-year U.S. Treasury note moved above 1.5% for the first time in over a year, reflecting expectations that inflation is headed higher, which in turn may prompt central banks to raise interest rates. On the data front, the US economy grew at an annual pace of 4.1% in the fourth quarter, slightly faster than first estimated but slower than expected. As such, the tech-heavy Nasdaq shed 3.5%, its steepest loss since October. The S&P 500 and the Dow Jones dropped nearly 2.5% each.
Following suit, Asian shares slipped as rising bond yields spooked investors. MSCI’s broadest index of Asia-Pacific shares outside Japan slid more than 3%, its steepest one-day decline since May 2020. The additional selling pressure came from Sino-U.S. trade relations after Katherine Tai, Biden’s top trade nominee, backed tariffs as a legitimate tool to counter China’s state-driven economic model.
In Europe, equities opened lower but the bearish momentum has slowed somewhat as the US Treasury yields started to retreat slightly. Anyway, regional stocks tumbled 1.5% in early trading, led by miners and technology shares. In another sign of some improvement in investor sentiment, S&P 500 futures and Nasdaq futures have erased sharp losses from earlier to settle marginally higher on the day.
Meanwhile, the safe-haven dollar demand started to ease early in Europe, suggesting risk aversion is abating further. EURUSD came off intraday lows around 1.2130 and was last seen flirting with the 1.2155 area. Later in the day, fresh economic data including personal spending and personal income could affect short-term dynamics in USD pairs.
Elsewhere, gold prices plunged to fresh mid-2020 lows around $1,755 earlier in the day before trimming losses. The precious metal came under severe selling pressure amid a broad-based rally in the greenback. The bullion will likely continue to struggle in the short term while recovery attempts could attract more sellers in the short term.