European stock futures shrink to over 1% as bond sell-off goes deep
NEW YORK (US) – European stock index futures saw itself sinking to more than 1% on Friday, leaving traces of steep losses on Wall Street and in Asian markets following a jump in bond yields. Concerns of equity valuations added onto it, and determined demand for riskier assets.
Euro Stoxx 50 futures came down to 1.7% by 0637 GMT, while FTSE futures and DAX futures fell 1.2% and 1.4%, respectively.
Asian markets dropped to a one-month low, while the dollar rose from a three-year impasse as the 10-year Treasury yield touched a one-year high of 1.614%, triggering fears the heavy losses could lead to selling, which could be rather distressed in other assets.
Michael Hewson, a market analyst at CMC Markets UK, said, “This sharp push higher (in bond yields) appears to be starting to blow the froth off some of the more richly valued parts of the market, begging the question as to whether investors will move this cash into the weaker parts, which have been starting to show signs of life.”
This week’s selloff had a heavy toll on high-flying technology stocks after strengthening the global stock market recovery from a crash imposed by coronavirus last year.
Energy, banking and mining stocks, on the other hand, have performed better than the STOXX 600 over expectations of a pickup in business activity after the rollouts of vaccine.
That said, the benchmark European index is likely to post its first weekly decline in four, in spite of getting assurances from European Central Bank chief Christine Lagarde and other policymakers, which didn’t succeed in stemming the rise in yields.
On Friday, ECB chief economist Philip Lane said the central bank was evaluating the surge in government bond borrowing costs, however, it would not take part in controlling the yield curve.
Meanwhile, fourth-quarter earnings. which were better than expected, have restored optimism about a corporate recovery, bound to be quicker this year. According to Refinitiv, out of the 194 companies in the STOXX 600 that have reported quarterly earnings so far, 68% have surpassed analysts’ estimates.
Germany’s Deutsche Telekom confirmed forecast-beating fourth-quarter results on Friday as its US unit T-Mobile continued to be on the road of growth.
On Wall Street, futures traces the Nasdaq 100 let down 0.9%, a day after the Nasdaq Composite declared its biggest daily percentage fall in four months. S&P e-mini futures were down 0.4%.