European stock markets are deep in the red as the brutal sell-off seen on Wall Street last night has set the tone for today.
Equities are under pressure as the rise in US government bond yields suggests the markets are pricing-in an interest rate hike from the Federal Reserve. In recent weeks, there has been growing speculation the US central bank will hike rates three or possibly four times in 2022.
Volatility in the markets has drifted lower today as equities are trading within a relatively small range, and the currency market is calmer too. Equity markets in Europe are largely higher this afternoon as the rebound that began on Tuesday is still in play.
Traders are buying back into European equity markets as government bond yields are a little lower. At the start of the week, the US 10-year yield pushed above 1.80%, and that triggered a wave of selling in equities, in particular US stocks.
Volatility is low in equity markets due to a lack of major macroeconomic news. The optimism that was in circulation at the end of last week, following the loan repayment from Evergrande, is still doing the rounds today.
The mood in equity markets is downbeat on account of the disappointing data posted by China overnight, in addition to that, the tick higher in government bond yields is hurting stocks too.
Stocks are enduring heavy losses today as a spike in government bond yields has sent a shock through the markets.
Equity markets are moving higher today as traders are less fearful of the possibility of China slowing down, it also helps that government bond yields have dipped.
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