Opening Bell: Markets Wake To Fed's Economic Pessimism; Yields Tumble

 | Mar 21, 2019 06:00AM ET

  • Global stocks drop as dovish Fed confirms economic slowdown
  • Treasury yields tumble to lowest level in a year; dollar rebounds from Fed-led drop
  • Sterling falls on May's request for Brexit deadline extension
  • Oil hits $60 for the first time since November but later slips lower
    • h2 Key Events/h2

    Asian markets chaperoned Wednesday's U.S. losses into the European session this morning, with futures on the S&P 500 and Dow suggesting that selloffs will resume in the upcoming North American session. A skeptical market is weighing the benefits of a dovish Fed—which ruled out any rate hike this year and detailed the end of its balance sheet reduction yesterday—against a backdrop of economic slowdown. Also weighing on sentiment, President Donald Trump's trade optimism, aired earlier this week, gave way to new warnings that U.S. tariffs on Chinese goods may apply for a "substantial" period of time.

    The STOXX 600 opened 0.15% lower, adding to yesterday's selloff, which erased two days of gains. Technically, the 50 DMA, which was approaching the 200 DMA from the bottom as bulls cast their hopes in a golden cross, may be heading towards a sell signal, as the 200 DMA forces the 50 DMA lower.

    In the earlier Asian trading, most regional benchmarks posted a slide. Japanese indices and Hong Kong's Hang Seng were closed for a holiday.

    h2 Global Financial Affairs/h2

    In yesterday’s U.S. session, equities briefly rebounded from the immediate selloff that followed signals, from the Federal Reserve, that its pause in rate hikes was motivated by a slowing economy. After the short-lived bounce, most stocks ended lower for the second day, while yields on 10-year Treasurys tumbled as investors rotated into bonds.

    The S&P 500 slipped 0.29%, dragged down by Financials (-2.06%) shares, which stand to lose the most in a lower-rate environment. Gains in Communication Services (+0.9%) and Energy (+0.88%) did little to offset losses in banks.