OVERNIGHT MARKETS AND NEWS
June E-mini S&Ps (ESM15 -0.83%) this morning are down -0.70% and European stocks are down -1.82% as a rout in global government bond markets undercuts equity prices. Stocks bounced from their worst levels on increased M&A activity after Verizon said it will buy AOL for $4.4 billion. The 10-year German bund yield jumped 10 bp to 0.715% and the U.S. 10-year T-note yield rose 8 bp to 2.35%, the highest in 5-1/2 months, after Goldman Sachs warned that “long-dated bonds remain a poor investment.” Stocks and bonds were also pressured by comments from New York Fed President Dudley who said that the Fed’s first rate increase since 2006 will usher in a “regime shift” that will stir financial markets when it occurs. Japan’s 10-year bond yield jumped 6 bp to a 2-month high of 0.45% after a Japanese auction of 10-year bonds drew a bid-to-cover ratio of 2.24, the lowest in 6 years and a sign of weak demand. Asian stocks closed mixed: Japan +0.02%, Hong Kong -1.12%, China +1.56%, Taiwan +0.18%, Australia +0.88%, Singapore-0.82%, South Korea -0.03%, India -2.29%.
Commodity prices are mostly higher with a weaker dollar. Jun crude oil (CLM15 +1.86%) is up +1.69% and Jun gasoline (RBM15 +1.99%) is up +1.95%. Metals prices are higher. Jun gold (GCM15 +0.90%) is up +0.88%. Jul copper (HGN15 +1.27%) is up +1.12%. Agriculture prices are lower ahead of today’s USDA WASDE crop production report.
The dollar index (DXY00 -0.66%) is down -0.69%. EUR/USD (^EURUSD) is up +0.86% on optimism that a Greek debt deal can be reached. USD/JPY (^USDJPY) is down -0.09%. GBP/USD rose +0.58% to a 4-3/4 month high after UK Mar industrial production rose more than expected.
Jun T-note prices (ZNM15 -0.52%) are down -12.5 ticks at a 4-1/4 month nearest-futures low.
Speaking today at a panel discussion in Zurich, New York Fed President Dudley said that although the timing is uncertain, the Fed’s first rate increase since 2006 will usher in a “regime shift” that will stir financial markets when it occurs.
