Global markets face pressure from bond selloff and trade war concerns

Markets remain under pressure as a combination of rising global bond yields, trade war uncertainties, and disappointing corporate earnings weigh on investor sentiment. The sharp decline in stocks and government bonds signals increasing caution among investors, while policymakers look for ways to stabilize their economies.

China prepares policy measures to support growth

China has reiterated its commitment to achieving a 5% GDP growth target, despite the ongoing trade war with the US. The government emphasized that it has ample fiscal and monetary tools to support economic stability. The People’s Bank of China is expected to cut interest rates and reduce reserve requirements to stimulate lending, while additional stimulus measures are likely to be introduced in the coming months.

In response to rising US tariffs and weakening domestic demand, Chinese authorities are also exploring new policies to boost consumption. This includes government-backed credit programs and financial aid for families, aiming to encourage spending and offset economic headwinds.

Meanwhile, China is working to strengthen trade partnerships outside the US, seeking free trade agreements with other nations to reduce reliance on American imports. Despite challenges, policymakers remain confident in their ability to navigate economic risks and implement strategic measures to maintain stability.

German bonds extend historic selloff, yields surge

Germany’s 10-year bond yields saw their biggest increase since 1990, as investors reacted to Berlin’s plans to deploy hundreds of billions of euros for defense and infrastructure projects. The move led to a sharp selloff in global bond markets, with yields rising across Europe, Japan, and the US.

The selloff comes ahead of the European Central Bank’s policy meeting, where officials may reconsider the pace of interest rate cuts. Markets have scaled back expectations for multiple rate reductions this year, with only one more cut fully priced in.

The shift in German fiscal policy, aimed at boosting European security spending, is reshaping expectations for long-term government debt issuance and could drive further volatility in bond markets worldwide.

Stock markets decline as tech earnings disappoint

US stock futures point to a weaker open following a broad selloff driven by disappointing tech earnings, trade tensions, and rising bond yields.

Nasdaq 100 futures dropped 1.2%, S&P 500 futures fell 1% and Dow Jones futures declined 0.9%

Shares of Marvell Technology plunged 15% after its earnings report failed to meet investor expectations, while CrowdStrike also declined after issuing a weaker-than-expected forecast. Tech stocks remain under pressure as rising interest rates increase the cost of capital and weigh on future growth projections.

European markets also struggled, with the Stoxx 600 down 0.6%, following the bond market turmoil. Higher borrowing costs and economic uncertainty have kept equity investors on edge.

Looking ahead

Key economic events to watch for the rest of the week:

ECB Rate Decision (Thursday): Markets expect a 25bps rate cut, though bond market turmoil may shift expectations.

US Trade Data and Jobless Claims (Thursday): Important indicators for economic health and labor market strength.

US Jobs Report (Friday): A critical factor for Federal Reserve policy direction.

Fed Chair Powell’s Speech (Friday): Market participants will be looking for signals on future rate decisions.

DXY declines

The US Dollar Index (DXY) experienced a significant decline during yesterday’s trading, reaching its lowest level since November of last year at 104.01. This drop represents a loss of over 90% of the gains made following the US election. Furthermore, the index has retraced by 61.8% from the rally that occurred from October to January. This could signal a potential short-term upward retracement before downward pressure continues. Any upside movement is likely to remain capped below 107.00 for the time being.

EURUSD testing 1.08

The Euro (EURUSD) finally touched 1.08 during the Asian session today, which aligns with the target identified by the Time/Price method mentioned a few weeks ago. Currently, the bullish outlook for the Euro has strengthened, and today’s decision by the European Central Bank (ECB) could prompt another price increase, particularly if the ECB hints at a pause in interest rate changes. If this occurs, the next key level to monitor will be 1.09. On the downside, any retracement is expected to remain above 1.0600 for now.

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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