Stock Investors Continue to Head for the Exits

The global sell-off in the equities markets continued early Tuesday with shares in Asia tumbling in response to massive losses in the major U.S. indexes the previous session. The sell-off in the U.S. markets on Monday was a continuation of Friday’s weakness as investors headed for the exits in the wake of rising interest rates.

Traders could not find one key fundamental catalyst behind the aggressive selling. However, they did note that a number of sell-stops being triggered at big numbers like 25,000 in the Dow may have contributed greatly to the losses.

The major concern for investors is the negative impact of rising yields. Much of the selling started last week when the 10-year Treasury Note yield rose above 2.70 percent.

U.S. Treasury Yields

U.S. government bond prices rose overnight on safe-haven demand. The yield on the benchmark 10-year U.S. Treasury Note last stood at 2.7093 percent after rising as high as 2.88 percent on Monday.

Gold

Gold prices are up on Tuesday, underpinned by safe haven buying fueled by another steep sell-off in the global equity markets. Gold is seen as a safe-haven investment due to its ability to retain value even at times of financial or political uncertainty. It is also used as a hedge against inflation.

Gold is currently in an uptrend despite two weeks of sideways to lower price action. A trade through $1329.10 will change the main trend to down. The key resistance level is $1349.80. The market could surge to the upside if buyers talk out this level with conviction.

Crude Oil

U.S. West Texas Intermediate and internationally-favored Brent crude oil futures were trading lower on Tuesday, extending their losses from the previous session. Traders were reacting to the shedding of risky assets and commodities although there were some concerns over rising U.S. production. Sellers didn’t seem to be too concerned about any specific oil-related fundamentals. Their focus appeared to be on the downside momentum being generated by the stock market sell-off.

Forex

The Australian Dollar is trading lower early Tuesday as the rout in the global equity markets continues. This is driving down demand for higher-yielding and commodity-linked assets. Traders are also responding to weaker-than-expected retail sales and trade balance reports. Investors are also responding to the RBA interest rate decision.

The USD/JPY was under pressure on Tuesday as investors continued to move money into the lower-yielding Japanese Yen. In other news. Bank of Japan Governor Haruhiko Kuroda said the fundamentals behind stock prices remained solid as the Japanese, U.S. and European economies were in “very good shape.”

“The recovery (in these economies) is broadening across sectors and the outlook remains good as a trend,” Kuroda told parliament, adding that the central bank was carefully watching financial market developments.