The S&P 500 is down for the third straight session today after reaching an all-time high at the end of last week.
The index is trading around 1859, only 1.5% off the high, but traders say risky assets globally look they are beginning to roll over and head lower.
“The price moves are not for the most part very big, but it is beginning to look as if the markets are rolling over,” says Marc Chandler, global head of currency strategy at Brown Brothers Harriman.
In the absence of any major economic data releases so far this week, concerns raised by Chinese trade data released over the weekend, along with the first default in China’s domestic corporate bond market and the subsequent rout in copper (an asset that many Chinese corporates use as collateral to secure loans through China’s fragile shadow banking system), have roiled global financial markets.
The U.S. dollar is appreciating against the euro and many emerging-market currencies. The Japanese yen, in turn, is appreciating against the dollar.
The yield on the 10-year U.S. Treasury note is trading at 2.73%, four basis points below Tuesday’s closing levels, as market participants looking to bet against U.S. government bonds are moving to the sidelines.
“Asset markets feel like equities are trying to roll over,” says Tom Tucci, head of U.S. Treasury trading at CIBC World Markets.
“Corporate issuance has been heavy and I get the impression that high yield and investment grade are feeling quite full here. The bid in Treasuries continues to be in longer end.”
In the euro zone, government bond yields are lower too, with the exception of Spain and Portugal. Equity indices across the bloc are down more than 1% (with the exception of Italy’s FTSE MIB, which is only 0.5% lower).
The charts below show movements in various markets. Across the top from left to right are S&P 500 futures, the U.S. dollar-Japanese yen exchange rate, and the euro-U.S. dollar exchange rate. Across the bottom are gold futures, 10-year U.S. Treasury futures, and December 2015 eurodollar futures.