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Equities sold off heavily in the US session as a combination of rising US Treasury yields and renewed trade war concerns unsettled stock markets, explains the analysis team at Danske Bank.  

Key Quotes

“Fears over equity valuation have been lingering for a while and notably technology stocks were hard hit with Nasdaq down over 4%, but also Dow Jones and S&P500 down more than 3%.”

US Treasury markets gained with yields down across the curve  and the 10Y point dropped more than 4bp to now stand at 3.15%.”

The equity rout made the US President sharpen his recent criticism of the Fed  . Trump said that the sell-off in equities was not driven by rising trade tensions but rather by the Fed ‘going loco’ with respect to rate hikes and adding ‘they’re so tight. I think the Fed has gone crazy’.”

“The fall in equity markets could put some pressure on the Fed, but the comments from Trump are probably in themselves working in the other direction. Indeed, as central bankers sometimes put it, ‘we are like whipped cream – the more you beat us the harder we become’. Meanwhile,  focus is turning increasingly to whether the US could declare China a currency manipulator  in its semi-annual report next week.”