For much of this year, market movements have been driven by international political developments, particularly trade and tariff tensions between the US and other major economies. This week, however, the focus has shifted to domestic politics, as attention turns to the White House’s tax and spending bill currently moving through Congress. Concerns that the bill may fall short in addressing the budget deficit have shaken investor confidence, sending stocks lower and treasury yields higher.
With the US 10-year treasury note yield climbing above 4.60% and the 30-year yield climbing above 5.10%, investors are backing away from stocks and bonds. US index futures are down 0.5% across the board this morning, adding to yesterday’s US index losses of 1.4% to 1.9%. Commodities are also under pressure this morning with Crude Oil down 1.5% and Copper is down 0.9%.
European losses are even deeper following a round of disappointing Flash PMI survey numbers which suggested a worsening contraction across the continent. The Dax, CAC and FTSE are all down in the 1.0%-1.2% range this morning.
With treasury yields climbing, the US Dollar is bouncing back a bit this morning, posting gains of 0.1%-0.3% against the Euro, Loonie, and Pound. Gold is holding steady near $3,300/oz. Surprisingly, Bitcoin is up 3.2% in a generally risk off market suggesting it may be attracting some of the risk capital leaving equities.
US Flash Manufacturing (street 50.1) and Flash Services (street 50.8) PMI numbers are due at 9:45 am EDT, followed by US existing home sales at 10:00 am.