US Open Note – Stocks retreat and dollar nudges higher as yields spike



Dollar and safe havens shine; loonie amongst the few winners

The US dollar is storming higher today, heavily supported by surging Treasury yields, as markets seem to be pricing in four rate hikes by the Fed in 2022. Moreover, the significant losses observed in risky assets due to rising Treasury yields triggered a broader risk-off sentiment in the markets, adding more fuel to the dollar’s rally. In addition, the soaring risk aversion in today’s session favours safe haven currencies such as the Japanese Yen and the Swiss franc, which are appreciating against a broad range of currencies.

However, the loonie is the stronger currency on the forex spectrum today as it is the only commodity-linked currency that managed to capitalize on the fact that oil is trading near seven-year highs. On the other hand, the aussie and kiwi are inching lower, largely pressured by the prevailing risk-off sentiment.

The euro and British pound are struggling in today’s session without any major headlines behind these weaknesses as their pullback is mainly attributed to the stronger dollar.

US stocks tumble amid surging yields

Wall Street is set to open the week lower as surging Treasury yields seem to be inflicting serious damage on tech stocks and consequently on the Nasdaq. Moreover, weaker-than-expected Q4 earnings reported by most major US banks are dragging the S&P 500 lower as well. More specifically, e-mini futures for the Nasdaq, S&P 500 and Dow Jones are taking a hard hit in pre-market trade, currently losing 1.65%, 1.05% and 0.9% on the day, respectively.

In Europe, most major indexes are in the red today as increasing odds for faster rate hikes by the Fed seem to be affecting investors’ risk appetite.

Oil near 7-year highs; gold holds steady

Oil prices jumped to their highest levels since 2014 today as geopolitical flare-ups in the Mideast Gulf increased fears for renewed supply disruptions amid an already tight supply outlook. Gold is a little softer on the day but it is holding its ground, probably endorsed by the general risk-off sentiment in the markets, although it is being heavily pressured by rising Treasury yields and a stronger dollar.

Bitcoin and the broader cryptocurrency market continue to be a sea of red today as surging Treasury yields are significantly weighing on risky assets.

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