Stock markets around the world are headed lower to begin the trading week.
In the United States, the S&P 500 index is trading around 1868, down 0.5%. During Friday’s session, the index hit an all-time high of 1883.57. The German DAX is leading European indices lower, down 1.2%. Asian markets closed lower overnight as well.
The U.S. dollar and the Japanese yen are strengthening against most major currencies around the world.
With no new economic data released in the United States this morning, disappointing data out of China and Japan over the weekend seem to be setting the tone.
Treasuries seem to be getting a bit of a lift as equity markets show weakness — the yield on the 10-year U.S. Treasury note is 2.78%, one basis point below Friday’s closing levels.
On Friday, Treasuries sold off following the release of better-than-expected U.S. jobs data, causing 10-year yields to rise 5 basis points.
“We continue to draw a distinction between U.S. rates backing up driven by geopolitical optimism and equity bounces, versus rates backing up when the Fed is viewed as being forced to react to incoming data,” says Steven Englander, global head of G10 FX strategy at Citi.
“In the first instance, the dominant force is the risk-on mood of markets, and that remains USD-negative. When U.S. rates back up because of fear that the Fed is back in town, that is more risk-off than risk-on globally and USD appreciates against most currencies in EM and G10.”
The charts below show movements in various markets. Across the top from left to right are the S&P 500 index, 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.