Fear over the accelerating bond market rout is causing a collapse of European stocks on Tuesday and feeding through to a considerably lower US market open.
German bunds yields are rising faster than US treasuries and closing the yield advantage of US debt over European debt. US dollar-denominated assets are now becoming relatively less appealing than the equivalent European assets. This unwinding of the yield differential between treasuries and bunds is driving EUR/USD higher which in turn is causing a drop in the German DAX
German stocks tend to be more export-orientated and are more sensitive to a move in the euro, which up until recently had been falling because of quantitative easing by the ECB. US stocks are lower in sympathy with those in Europe. The potential benefits of a weaker dollar for US-based international conglomerate exports mean the declines could be relatively smaller in the US stock markets than Europe.
Clothing retailer Gap is expected to open lower after reporting a decline in net sales of almost 10% year-over year in its quarterly earnings.
Futures suggest the:
will open 19 points lower at 2,086 with the
expected to open 154 points lower at 17,951 and the
41 points lower at 4,397.
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