Futures Slide As Bond Yields Spike To 3 Week High

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by Tyler Durden
Wednesday, May 29, 2024 - 12:18 PM

US futures are weaker with tech and small caps underperforming after the NDX made a new ATH yesterday on the back of the relentless Nvidia meltup. The weakness has been driven by surge in yields, a result of the latest batch of hawkish Fed remarks, two very weak bond auctions and stronger macro data (Consumer Sentiment; Housing Prices). Will we see more of the same today with the 7Y auction on deck? At 7:45am S&P futures are 0.6% lower while Nasdaq futures dipped 0.7% as Mag7 and Semi stocks (incl. NVDA) are all lower pre-mkt; Asian stocks fell, led by losses in Hong Kong, while Europe’s Stoxx 600 index also slipped 0.6%. Yields continued their rise, and after jumping 9 basis points on Tuesday, 10Y yields rose further to 4.57%, the highest level since May 3 when the huge payrolls miss sent yields sliding. The USD caught a bid, but commodities were a bright spot with both energy and base metals moving higher as another attack in the Red Sea added to heightened geopolitical tensions in the Middle East . It's a light calendar: the only US eco data is the May Richmond Fed index (10am) and Dallas Fed services activity (10:30am); we also get speeches from the Fed's Williams (1:45pm) and Bostic (7pm). Fed releases Beige book at 2pm

In premarket trading, Marathon Oil shares climbed 5.9% after reports that ConocoPhillips was set to acquire the E&P company, valuing the company at around $15 billion. Airline stocks on both sides of the Atlantic are under pressure after American Airlines cut its profit guidance heading into the crucial summer travel season, just one month after it published a very optimistic outlook which sent its stock price surging in a classical case of stock price manipulation.

And indeed, American Airlines shares plunged 8.3% after the airline slashed its second-quarter adjusted earnings per share outlook, taking the forecast below consensus expectations. The company also announced the departure of its chief commercial officer, Vasu Raja. Here are some other notable premarket movers:

  • Bank OZK shares slip 4.4% after a downgrade to sell from buy at Citi.
  • Cava (CAVA US) shares decline 3.2% despite the Mediterranean restaurant chain reporting better-than-expected 1Q same-store sales growth and boosting its outlook.
  • Digital Turbine (APPS US) shares slide 8.5% after the company reported net revenue for the fourth quarter that missed estimates.
  • Faraday Future (FFIE US) shares plummet 43% after the electric vehicle maker reported fourth-quarter and full-year earnings and withdrew its production target guidance for 2024.
  • First Solar (FSLR US) shares fall - after a downgrade to hold from buy at DZ Bank.
  • Robinhood Markets shares rise 3.3% after the board of directors approved a share repurchase program of up to $1 billion. Analysts see mostly muted effects of the buyback, with those at Keefe Bruyette & Woods calling it a “conservative approach to capital return.”

Despite solid May performance - the S&P 500 is up 5.4% in the month as of Tuesday’s close, while Europe's Stoxx 600 is on track for a 2.2% gain in May - markets are feeling the ripples from a rough US session, after tepid demand for US note sales, resilient consumer confidence data and central bank talk fueled expectations interest rates will stay elevated. There’s an auction of seven-year Treasuries later Wednesday and an important US price growth print is in focus at the end of the week.

"The higher-for-longer bond yields risk is biting into equity valuations and short-term pressure seems to be a given,” said Leonardo Pellandini, an equity strategist at Bank Julius Baer. “Nevertheless, with inflation expectations moderating and interest-rate cuts coming soon, we think markets can continue to climb higher.”

And speaking of higher rices, Friday sees the release of the Fed’s preferred inflation gauge — the personal consumption expenditures index. Economists expect the PCE deflator to have risen in April at an annual pace of 2.7%, the same as in March.

“One potential banana skin is that major downside surprises in inflation could now bring in the view that the US economy could not be in as strong shape as previously expected — i.e. ‘bad news is bad news’,” Geoffrey Yu, strategist at Bank of New York Mellon.

European stocks also declined; the Stoxx 600 fell 0.3% with travel, financial service and consumer product shares leading declines. Major markets are all lower with France/Italy the biggest laggards. Oil and gas stocks outperformed after the price of crude hit a five-week high as another attack on a ship in the Red Sea added to heightened geopolitical tensions. Anglo American shares fell as much as 2.7% as BHP asked for more time to discuss its takeover plan and outlined a series of commitments; BHP shares meanwhile rise in London trading.  Here are the biggest movers Wednesday:

  • Renault rises as much as 4%, hitting highest since October 2019, as Goldman upgrades the automaker to buy from neutral in note citing its “strong product cadence”
  • IDS gains as much as 4.4% after the parent company of Royal Mail agreed to a takeover by Czech billionaire Daniel Kretinsky, setting the scene for a political battle over its future ownership
  • Merck KGaA shares rise as much as 2.1%, outperforming the Stoxx 600 Health Care Index, after Morgan Stanley increased its price target on the German company, citing re-rating potential
  • Schibsted shares climb as much as 6% to hit levels not seen since December 2021 after analysts at Carnegie re-initiate coverage of the digital media company with a buy rating
  • Xvivo Perfusion gains as much as 9.1% after SEB published a favorable note on the Swedish organ transplant technology firm, highlighting a very optimistic possible blue-sky scenario
  • Saab falls as much as 5.9% after Sweden’s announcement on Tuesday that it would halt shipments of the firm’s Gripen fighter jets to Ukraine in discussion with other allies
  • CD Projekt dropped as much as 7%, erasing early gains, after failing to provide new information on plans for its next Witcher game due for production phase in 2H
  • RS Group falls as much as 3.5% after the industrial group was downgraded by Liberum and had its price target cut by RBC after analysts lowered their profit forecasts after recent FY results
  • Mobico drops as much as 6.6% following a downgrade to hold by Berenberg, which says upside potential for the bus and rail company’s stock is still “opaque”

Earlier, Asian stocks fell, led by losses in Hong Kong, as rising bond yields and more Fedspeak saw US rate-cut bets further recede. The MSCI Asia Pacific Index fell as much as 1.4%, on track for its biggest single-day plunge since April 19. Tencent, TSMC and Samsung were among the biggest drags Wednesday. Korean stocks slid after Samsung’s labor union said it plans to carry out its first strike ever, while Australia’s key benchmark tumbled after inflation came in faster than expected in April. The regional gauge is still on course for more than 2% gain this month.

  • Hang Seng and Shanghai Comp were mixed with notable losses in tech and consumer stocks front-running the declines in Hong Kong, while the mainland bucked the trend after more Chinese cities announced property support measures and the PBoC also conducted a relatively substantial liquidity injection heading into month-end.
  • ASX 200 was dragged lower amid a jump in yields and after disappointing data including firmer-than-expected monthly CPI for April and a surprise contraction in Construction Work Done during Q1.
  • Nikkei 225 failed to sustain an early momentum and a brief foray above 39,000 with headwinds from rising yields.

In Fx, the Dollar Index rises 0.1% while the Swedish krona is the weakest of the G-10 currencies, falling 0.3% versus the greenback.  The euro fell to a near two-year low versus the pound after data showed inflation in May slowed across Germany’s regions compared to a month ago

  • EUR/GBP down 0.3% to 0.84838 before halving losses, the lowest since August 2022.
  • EUR/USD drops as much as 0.3% to 1.0829, hitting a fresh intraday low after the data.
  • USD/JPY little changed at 157.25, versus 157.40 day high, close to the 157.52 level where Japanese officials were last suspected to have intervened to support the currency.
  • AUD/USD swings between gains and losses to stand little changed at 0.6651
  • Aussie gained earlier after data showed April CPI rose 3.6% year-on-year, beating estimates and bolstering the case for the Reserve Bank to keep interest rates at a 12-year high next month

In rates, the US treasury curve continues to steepen with long-end yields higher by less than 2bp on the day and front-end little changed. After jumping nine basis points on Tuesday, 10-year Treasury yields inched higher to 4.56%. Bunds pared losses during London morning after German state CPI figures suggested the national print, due at 8am New York time, might come in below forecasts. German 10-year yields rise 3bps to 2.62%. Australian bonds are among the worst performers after CPI topped estimates earlier in the session. UK 10-year yields added five basis points while those on similar-maturity German debt pulled back from a six-month high after regional inflation prints came in lower than the monthly estimate for the national figure. The US auction cycle concludes with 7-year note sale, following weak reception for 2- and 5-year notes Tuesday, and first operation of new buyback program targets shortest-maturity coupons.

In commodities, brent crude advanced 0.8% to $84.93 per barrel as another attack in the Red Sea added to heightened geopolitical tensions in the Middle East ahead of an OPEC+ meeting on the weekend. West Texas Intermediate climbed above $80 a barrel. Spot gold falls roughly $19 to around $2,343/oz.

Bitcoin is softer and dips below $68k, whilse Ethereum holds just above $3.8k.

Looking at today's calendar, US economic data includes May Richmond Fed manufacturing index (10am) and Dallas Fed services activity (10:30am). Fed officials’ scheduled speeches include Williams (1:45pm) and Bostic (7pm). Fed releases Beige book at 2pm

Market Snapshot

  • S&P 500 futures down 0.6% to 5,294.50
  • STOXX Europe 600 down 0.4% to 517.21
  • MXAP down 1.4% to 178.50
  • MXAPJ down 1.5% to 557.71
  • Nikkei down 0.8% to 38,556.87
  • Topix down 1.0% to 2,741.62
  • Hang Seng Index down 1.8% to 18,477.01
  • Shanghai Composite little changed at 3,111.02
  • Sensex down 0.7% to 74,611.42
  • Australia S&P/ASX 200 down 1.3% to 7,665.63
  • Kospi down 1.7% to 2,677.30
  • German 10Y yield little changed at 2.61%
  • Euro down 0.2% to $1.0836
  • Brent Futures up 0.7% to $84.85/bbl
  • Gold spot down 0.6% to $2,347.68
  • US Dollar Index up 0.14% to 104.76

Top Overnight News

  • More of China’s biggest cities are easing home-buying policies, after top leaders recently signaled a shift to aggressive measures to resolve the country’s ongoing property crisis. Guangzhou and Shenzhen, two of China’s four Tier-1 cities, on Tuesday reduced the down payments required for first-home purchases by 10 and 15 percentage points, respectively. They also lowered mortgage rates for second homes and trimmed banks’ loan prime rates. WSJ
  • China’s growth outlook is increased by the IMF for ’24 (from +4.6% to +5%) and ’25 (from +4.1% to +4.5%) due to a strong Q1 performance and recent policy support measures. FT
  • Australia’s CPI for Apr runs hot, coming in +3.6% Y/Y (up from +3.5% in Mar and ahead of the Street’s +3.4% forecast). WSJ  
  • EU will move to hike tariffs on Chinese EV imports on 6/5, although it is in the interests of both sides to strike a deal and soften the blow. RTRS
  • Emmanuel Macron has called for Ukraine to be allowed to use western weapons against military sites in Russia, becoming the most senior Nato leader to ask for targeting restrictions set by Kyiv’s backers to be lifted. FT
  • Anglo American refused to give BHP more time to commit to a takeover offer, signaling the likely end —for now — to its $49 billion pursuit. BBG
  • ConocoPhillips is reportedly in advanced talks to purchase Marathon Oil (MRO), via FT citing sources; could value the Co. at just over its current USD 15bln market cap.
  • White House says Israeli strike in Rafah didn’t cross one of Biden’s red lines and will not trigger a change in US policy. NYT
  • Lawyers to Plastics Makers: Prepare for ‘Astronomical’ PFAS Lawsuits. At an industry presentation about dangerous “forever chemicals,” lawyers predicted a wave of lawsuits that could dwarf asbestos litigation, audio from the event revealed. NYT
  • BlackRock’s Bitcoin ETF surpassed the Grayscale Bitcoin Trust to become the world’s largest fund for the token. It attracted $16.5 billion since Jan. 11, while investors pulled $17.7 billion from Grayscale. BBG
  • American Airlines (AAL) lowers guidance for adjusted operating margin by 1ppt to around 8.5%-10.5% and now expects Q2 Adj. EPS to be between USD 1.00-1.15 (prev. view USD 1.15-1.45)
  • Fed Discount Rate minutes noted that all Fed reserve banks voted to hold the discount rate in April.

A more detailed look at global markets courtesy of Newsquawk

APAC stocks traded mostly lower after the indecisive performance stateside amid the rising yield environment. ASX 200 was dragged lower amid a jump in yields and after disappointing data including firmer-than-expected monthly CPI for April and a surprise contraction in Construction Work Done during Q1. Nikkei 225 failed to sustain an early momentum and a brief foray above 39,000 with headwinds from rising yields. Hang Seng and Shanghai Comp were mixed with notable losses in tech and consumer stocks front-running the declines in Hong Kong, while the mainland bucked the trend after more Chinese cities announced property support measures and the PBoC also conducted a relatively substantial liquidity injection heading into month-end.

Top Asian News

  • IMF upgraded China's 2024 economic growth target to 5% from 4.6% after "strong" Q1 and upgraded China's 2025 economic growth target to 4.5% from 4.1%, while IMF's Deputy Managing Director said they see scope for a more comprehensive policy package to address property sector issues and China's central government resources should be deployed to assist buyers of pre-sold unfinished homes.
  • China could invest some CNY 6bln in R&D of all-solid-state batteries, according to Chinese state media.
  • S&P affirms India's BBB-/A-3 rating; revises outlook to "positive" from "stable" amid robust growth and rising quality of government spending.

European bourses, Stoxx 600 (-0.4%) opened on a softer footing and continued to trundle lower as the session progressed, taking impetus from a subdued APAC session. European sectors are entirely the red, except Energy, which benefits from broader strength in the crude complex amid ongoing geopolitical uncertainty; strength which has dragged Travel & Leisure to the bottom of the pile. US Equity Futures (ES -0.6%, NQ -0.7%, RTY -0.7%) are entirely in the red, posting similar losses to that seen across European indices. As for stock specifics, American Airlines (-7.7% pre-market) sinks after it lowered its Q2 adj. EPS guidance.

Top European News

  • BHP (BHP AT) update on Anglo American (AAL LN) takeover: BHP believes a further extension to the UK regulatory deadline is required to allow for further engagement on its proposal to Anglo American. Since, Anglo American (AAL LN) rejects request from BHP (BHP AT) for "put up or shut up (PUSU)" extension; unanimously reject's BHP's third proposal.
  • Reuters Poll: ECB to cut deposit rate by 25bps to 3.75% on June 6, said all 82 economists; 55/82 economists said ECB to cut rates by 75bps in 2024 (vs. April poll 52/96)

Central Banks

  • BoJ Board Member Adachi said changing monetary policy frequently to stabilise FX moves would lead to big changes in rate moves and if interest rate moves are too big, that would cause disruptions in household and corporate investment. Adachi said responding to short-term FX moves with monetary policy would affect price stability but noted if excessive yen falls are prolonged and are expected to affect the achievement of the price target, responding with monetary policy becomes an option. Adachi also commented that the BoJ must maintain accommodative financial conditions until the price goal is achieved and they are not yet at a stage where they are convinced that there is a sustained achievement of the price target, so must maintain accommodative conditions and must absolutely avoid raising interest rates prematurely. Furthermore, he said they will likely reduce JGB purchases at some stage in the future but warned reducing the BoJ's JGB bond buying at a sharp pace could cause damage to the economy, as well as noted that if yen declines accelerate or become prolonged, inflation could re-accelerate faster than expected and may require the BoJ to quicken the interest rate hike.


  • USD is mixed vs. peers but DXY ultimately a touch firmer on account of EUR weakness. DXY has marginally eclipsed yesterday's best with a 104.79 high print.
  • EUR the laggard across the majors with EUR/USD nudged lower by regional German CPIs which saw M/M metrics come in broadly softer than implied by expectations for the mainland. EUR/USD has delved as low as 1.0830 vs. yesterday's 1.0889 peak.
  • Steady trade for the GBP vs. the USD with focus instead on EUR/GBP which has slipped below 0.85 for the first time since Aug'23 following the German State CPI metrics.
  • USD/JPY is currently flat with limited follow-through from comments by BoJ's Adachi. USD/JPY saw some volatility earlier in the session after tripping through stops at 157 but this was short-lived.
  • AUD in focus after following hot CPI data overnight. ING notes that the high CPI print puts paid to the chances of a RBA rate cut this year. AUD/USD spiked higher from around 0.6651 to 0.6666 before fading gains.
  • PBoC set USD/CNY mid-point at 7.1106 vs exp. 7.2528 (prev. 7.1101).

Fixed Income

  • USTs are modestly softer, following the prior day's soft 2yr and 5yr outings (7yr later today); Treasuries are off worst levels, in tandem with upticks in Bunds following the German State CPI figures.
  • Bunds have been lifted in recent trade (though still lower by 41 ticks) after German State CPIs came in, broadly speaking, cooler than the mainland implied M/M and roughly in-line Y/Y. Bunds went as high as 129.82, before fading the initial upside and now residing around pre-release levels.
  • Gilts are underperforming as the odds of a June BoE cut continue to languish around the 5% mark; Gilts down to a 95.97 base, 50 ticks below Tuesday's trough and bringing into view 95.36 & 95.42 lows from the last week of April and first week of May respectively.
  • BTPs briefly reclaimed 117.00 on the German inflation numbers though has since dipped below the level, but does fare better than European peers.
  • Germany sells EUR 1.22bln vs exp. EUR 1.5bln 2.60% 2041 Bund and EUR 0.4bln vs exp. EUR 0.5bln 1.0% 2038 Bund
  • UK sells GBP 1bln 0.125% 2039 I/L Gilt: b/c 3.16x (prev. 3.48x) & real yield 1.051% (prev. 1.076%)


  • Crude is firmer intraday and extending on Tuesday's gains amid ongoing geopolitical uncertainty, in wake of Israel's recent strikes on Rafah; Brent in a USD 84.09-84.44/bbl parameter.
  • Subdued trade across precious metals after Tuesday's rise, but with price action confined to Tuesday's ranges with spot gold within a USD 2,346-2,361/oz parameter at the time of writing - vs USD 2,340-2,364/oz yesterday.
  • Base metals are largely consolidating following Tuesday's rally driven in part by the slew of housing market support measures announced by various Chinese cities.
  • UBS forecasts end-2024 copper at USD 11.5k/MT and USD 12k/MT by mid-2025; sees higher commodity prices ahead, expects total returns of circa. 10% for broad commodity indexes over the next 6-12months.
  • Caspian Pipeline Consortium says export shipments seen falling by 7% in 2024; oil exports are seen declining from expected targets.
  • Norway Energy Minister says Government will not open the Nordland 6 area for Oil and Gas exploration
  • Norway's Kollsnes and Troll A platform are expected to restart today, according to the Power Exchange.
  • Venezuela revoked the invitation for the EU to send electoral observers, according to the head of the electoral council.

Geopolitics: Middle East

  • Algeria's UN envoy said they will propose a draft UN Security Council resolution on Gaza "to stop the killing in Rafah", according to Reuters.
  • US military said Iranian-backed Houthis launched five anti-ship ballistic missiles from Houthi-controlled areas of Yemen into the Red Sea, while M/V LAAX which is a Marshall Islands-flagged, Greek-owned and operated bulk carrier, was struck by three of the missiles but continued its voyage.
  • "Israeli forces have now pushed deeper inside Rafah, mostly along the Philadelphi Corridor, and are operating in the Tal Zaroub area. This means Israel controls almost the entirety of the Philadelphi Corridor", according to journalist Horowitz.

Geopolitics: Other

  • French President Macron said Ukraine should be allowed to hit military targets in Russia, according to FT.
  • North Korean leader Kim Jong Un said owning spy satellites will help the country's self-defence capabilities against US military provocation and that the recent satellite launch failed due to abnormal operation of the first-stage engine. Kim said the satellite launch was conducted with transparency and compliance with international law, while he added they will never give up efforts to own space reconnaissance capabilities.
  • China's Taiwan Affairs Office said a difference in systems is not an impediment to "reunification" with Taiwan, while it added that as long as Taiwan independence provocations continue, China military's actions will too.
  • Polish PM Tusk says Poland will reintroduce a buffer zone at the border with Belarus at the beginning of next week; Polish Defence Minister says ready to increase army presence on border with Belarus.

US Event Calendar

  • 07:00: May MBA Mortgage Applications -5.7%, prior 1.9%
  • 10:00: May Richmond Fed Index, est. -6, prior -7
  • 10:30: May Dallas Fed Services Activity, est. -9.4, prior -10.6
  • 14:00: Federal Reserve Releases Beige Book

Central Bank Speakers

  • 13:45: Fed’s Williams Joins Watertown Community Services Roundtable
  • 14:00: Federal Reserve Releases Beige Book
  • 19:00: Fed’s Bostic Speaks on Economy

DB's Jim Reid concludes the overnight wrap

Markets struggled to gain much traction yesterday, with sovereign bonds selling off globally thanks to several hawkish headlines and weak demand at a Treasury auction. The initial catalyst for the selloff was the US Conference Board’s consumer confidence indicator, which unexpectedly rose to 102.0 in May (vs. 96.0 expected), marking the first increase in the measure since January. On the positive side, that helped to ease fears that the US economy might be starting to slow more meaningfully, particularly given the previous reading for April was at a 21-month low. But even though there was relief that consumer confidence had stopped falling, it also led investors to dial back their expectations for future rate cuts, with Treasury yields rising after the release.

That hawkish trend was cemented by comments from Minneapolis Fed President Kashkari, who’s one of the more hawkish members on the FOMC right now. He said that “I don’t think anybody has totally taken rate increases off the table”, suggesting he was at least open to the idea they could happen in the future. Moreover, he sounded relaxed about the Fed not needing to move too quickly to ease policy, saying that “We have time to assess how much downward pressure we are putting on demand”. So that adds to the theme from various speakers recently, suggesting the Fed will take their time as they seek to gain further confidence in the path of inflation. That was reflected in market pricing too, with the chance of a Fed rate cut by the September meeting falling from 58% on Monday to 50% by the close yesterday, and overnight it’s declined further to just 46%.

In light of that and the weak Treasury sales, sovereign bond yields moved noticeably higher across the board yesterday, with the 10yr Treasury yield (+8.5bps) back up to 4.55%, which is its highest closing level in over three weeks. The move was exacerbated after a $70bn auction of 5yr notes and a $69bn auction of 2yr notes came in softer, and it was also the biggest daily move higher for the 10yr yield since April 10 after the March CPI release. Moreover, that trend has continued overnight, with the 10yr yield up a further +1.2bps to 4.56%. Meanwhile in Europe the moves were slightly smaller in the same direction, with yields on 10yr bunds (+4.5bps), OATs (+5.4bps) and BTPs (+6.8bps) rising as well.

The bond moves got further support from the latest rise in oil prices, as Brent crude (+1.35%) moved higher for a third consecutive session to close at $84.22/bbl. Now admittedly that’s still some way beneath its levels in April, but it marks a bounceback since last Thursday when it closed at a 3-month low of $81.36/bbl, and it also added to fears about inflationary pressures. Indeed, yesterday saw the 5yr US inflation swap reach a 3-week high of 2.561%. Prices have continued to inch higher overnight as well, with Brent crude now up to $84.42/bbl, putting it on track for a 4th daily increase.

Inflation will remain in the spotlight today, as we’ve got the German CPI release for May coming out, ahead of the Euro Area-wide print on Friday. These will be in particular focus, as this is the last inflation print ahead of the ECB’s decision next week, at which they’re widely expected to cut rates. In terms of what to expect, our German economists at DB see HICP rising to +2.7% in May (link here), and for the Euro Area, our economists see HICP moving up to 2.55% (link here). So a bit of an uptick for both on the year-on-year measures. Yesterday also brought the ECB’s latest Consumer Expectations Survey for April, which showed 1yr and 3yr inflation expectations were both down a tenth compared to March, coming in at 2.9% and 2.4% respectively.

For equities, there was a steadier performance in the US, with the S&P 500 (+0.02%) recovering from a late decline to build on a run of 5 consecutive weekly gains. In fact, the index is moving into increasingly rare historical territory now, as the S&P 500 has currently experienced 23 positive weeks in the last 30, which is a joint record going back to 1989. If this week turns out positive again, that would make it 24/31 positive weeks, which would be a joint record back to 1963, so it’s not often we experience this. We explored this in Jim’s chart of the day yesterday (link here).

However, that steadiness in aggregate masked some considerable divergence at the sectoral level. For instance, tech stocks outperformed – specifically semiconductors (+4.1%) – and the Magnificent 7 surged by +1.30% to a new all-time high, whilst the NASDAQ (+0.59%) also hit a new record. However, several defensive sectors struggled in the S&P, including healthcare (-1.25%) and consumer staples (-0.85%). Meanwhile in Europe, equities put in a much weaker performance, although that was partly a reversal from their Monday gains when they’d been open (which the US was catching up to). Nevertheless, there were still sizeable losses across the continent that more than reversed Monday’s moves, with the STOXX 600 (-0.60%), the DAX (-0.52%) and the CAC 40 (-0.92%) all falling back.

Overnight in Asia, risk appetite has remained weak as yields continue to move higher across the world. Moreover, that theme has continued overnight following a stronger-than-expected Australian CPI print, which rose to +3.6% in April (vs. +3.4% expected). In turn, that’s seen the Australian 10yr yield up +15.0bps overnight, and a similar trend has been evident across the region. For instance in Japan, the 10yr yield is up another +4.9bps to 1.07%, which is its highest level since 2011.

Meanwhile for equities, there’s also been weakness across the region, with loses for the Hang Seng (-1.54%), the KOSPI (-1.32%) and the Nikkei (-0.48%). The main outperformance has come in mainland China, where the CSI 300 (+0.38%) and the Shanghai Comp (+0.33%) have both posted gains, whilst the onshore yuan has weakened to its lowest level since November against the US Dollar, at 7.25 per dollar.

To the day ahead now, and data releases include the German CPI release for May, the Euro Area M3 money supply for April, and in the US there’s the Richmond Fed’s manufacturing index for May. From central banks, we’ll hear from the ECB’s Villeroy and the Fed’s Williams and Bostic, whilst the Fed will also release their Beige Book. Finally, a general election is taking place in South Africa.