Market participants can't settle on a narrative ahead of European trading
Asian stocks are faring better after a solid performance in Wall Street overnight, with US equity futures also trading up by 0.2% to start the day. However, Treasury yields have just fallen to their lows with 2-year yields down by 2.6 bps to 1.857% while 10-year yields are down by 1.9 bps to 2.111% currently.
This highlights indecision among traders as to what yesterday's recovery in risk assets all mean. We're at a crossroads now trying to figure out if the rebound yesterday is a start of a turnaround or just merely a dead cat bounce.
I still believe there's reason for markets to be cautious but with the way equities are behaving, there seems to be a particular disconnect between stocks and the global economy at the moment - more so after all the poor data from Asia earlier today.
The mixed mood in markets right now is leaving major currencies in a flux and traders have almost no clear direction to work with. This is the kind of market that makes trading that bit more difficult as sentiment can easily shift around at any instance.
Eventually, either bond traders or equity traders will be vindicated by the direction that markets will take in the coming sessions. For now, we can only wait it out to see who comes out on top and go with that sentiment.
