A rocky start to US-China talks in Alaska weighed on markets
Wall Street stocks fell dramatically overnight amid widespread risk aversion due to another spike in bond yields that fueled concern about rising inflation. The yield on the 10-year Treasury note rose to its highest level in more than a year above 1.7% before easing slightly. As such, the Dow Jones Industrial Average fell 0.46%, the S&P 500 was down 1.48%, and the Nasdaq Composite slumped 3.02%.
Asian equities were on the defensive as well, after U.S. shares slid from a record. Treasury yields continued hovering around the highest levels in over a year, making investors nervous. A rocky start to US-China talks in Alaska weighed on markets as well. Commenting on the meeting, Chinese Foreign Ministry spokesman Zhao Lijian said that there was a lot of confrontation. As a result, Japan’s Nikkei 225 and Hong Kong’s Hang Seng index shed 1.4% each, the Shanghai Composite dropped 1,69%, while Australia’s S&P/ASX 200 declined 0.56%.
In Europe, stocks opened in negative territory, mirroring a bearish tone globally. However, the overall risk mood is getting slightly better than in Asia Pacific trading, as Treasury yields are keeping gradually lower and that is helping to provide a slight lift in US futures. The pan-European Stoxx 600 dropped 0.6% in early trade.
As risk sentiment started to improve marginally in Europe, the USD index faded the earlier move to the proximity of 92.00. Still, the downside potential looks limited, as investors’ attention remains on yields, especially amid absent releases in the US calendar today.
In other markets, Brent crude is flirting with the $64 figure during the European hours following a plunge by 7% on Thursday. The sell-off was due to a combination of a stronger dollar, higher yields, risk aversion, and vaccination-related concerns. Despite the recent bounce, the upside potential in the oil market is limited so far.
