Evergrande, higher rates, lower US pre-market stocks
As the North American session begins, the USD is the strongest and the AUD is the weakest. China's Evergrande entered into a technical default after failing to pay all bondholders. The window is 30 days before it officially is declared an "official" default, but the cash-strapped company is not expected to rise from the ashes.
US yields are up modestly after the sharp rise yesterday. The 10 year is trading near 1.42% after trading as high as 1.452%. That level represents the midpoint of the range since the March 30 high (the high yield this year did reach up to 1.77% – there is room to head higher).
US stocks are lower in premarket trading. European equities are also lower. There is lots of the Fed speak today with Mester, George, Powell, Bostic, Bowman all on the schedule. The USD and the CHF are attracting the flow of funds. The commodity/risk off currencies led by the AUD and NZD (China concerns) are seeing investors/traders exit there currencies.
A snapshot of other markets as North American traders enter shows:
- Spot gold up $7.30 or 0.42% at $1750.55
- Spot silver is up 4 cents or 0.16% $22.54
- WTI crude oil futures are trading down $0.22 or -0.3% at $73.08
- Bitcoin is down sharply by $3811 or -8.49% at $41,129. China reiterated that bitcoin transactions are illegal in China which has spooked the market again
In the premarket for US stocks the major indices are lower after yesterday's sharp rise and as the wall worry starts to increase again:
- Dow -154 points after yesterday's 506.5 point rise
- S&P index -24 points after yesterday's 53.26 point rise
- NASDAQ index -105 points after yesterday's 155 point rise
In the European equity markets, the major indices are all trading lower:
- German Dax -0.8%
- France's CAC -1.0%
- UK's FTSE 100 -0.3%
- Spain's Ibex -0.1%
- Italy's FTSE MIB -0.4%
In the US debt market, yields are marginally higher with the 10 year trading near 1.42%. The 2– 10 year yield spread has widened by another basis point. Yesterday yield rose sharply.
In the 10 year European note sector, yields are also higher with France's yield currently trading at 0.112% up 3.5 basis point. That countries benchmark is becoming more more comfortable above the 0.0% level. German 10 year yields remains below the 0% level that -0.229%, but is continuing to chip away toward 0.0%.
If European yields can continue its move to the upside that would pave the way for the US yields to continue to run higher as well. Inflation remains a big concern as shortages in natural gas and food and supply chain bottlenecks (including shipping and trucking) are becoming more of a concern. Today however, the European currencies are being hit as dollar buying is the bigger influence.