European stocks are kick starting the day with sharp losses across the board, as the market selloff continues to gather pace amid mounting pressure from the bond market mostly. The opening changes are as follows:
- Eurostoxx -1.3%
- Germany DAX -1.0%
- France CAC 40 -0.9%
- UK FTSE -0.8%
- Spain IBEX -1.0%
- Italy FTSE MIB -1.4%
There isn’t much to cheer about when looking at the above changes, with Italy leading the declines and all major indices falling by at least 0.8%. The broader risk mood remains relatively fragile as investors continue to grapple with the fallout from the global bond market selloff.
10-year Treasury yields continue to hover near multi-decade highs, holding around 5.32% today, while European borrowing costs are also facing upward pressure. 10-year French bond yields are nudging higher again to 4.93% with 10-year German bond yields also pushing up to 3.50% amid persistent inflation concerns and growing fiscal concerns. The 10-year French and German yield spread is now climbing again to 143 bps after narrowing to just below 130 bps earlier in the week.
But as mentioned before, the focus right now isn’t so much on the yield spread itself. It is more about whether markets are starting to lean towards pricing in contagion risk across Europe.
Besides that, higher oil prices are also not helping with the market mood today. WTI crude has rebounded back to above $91 with Brent crude bordering on $104. Renewed Middle East supply disruptions are keeping energy costs elevated, threatening to complicate the inflation outlook.
We’re also starting to see all of that pressure weigh further on US futures after Wall Street produced a negative showing overnight. S&P 500 futures are now down 0.3% while Nasdaq futures are down 0.5% as risk appetite begins to sour as we get things going in European morning trade.
With surging bond yields and higher oil prices continuing to dominate the conversation, equity buyers are certainly struggling to find much reason to step back in. And unless we start seeing some relief in borrowing costs, I reckon the pressure on European stocks isn’t going away anytime soon.
This article was written by Justin Low at investinglive.com.