European and U.S. stock markets are digesting a brutal cross-asset selloff that sent global bond yields to multi-decade highs and knocked technology shares lower. S&P 500 futures held roughly flat on Wednesday as traders awaited Federal Reserve minutes and comments from ECB President Christine Lagarde, while Asian markets extended the slide overnight.
S&P 500 futures hold steady after tech rout
S&P 500 E-minis fell 3 points, or 0.04%, at 6:09 a.m. ET on Wednesday, while Dow E-minis rose 11 points and Nasdaq 100 E-minis lost 66.25 points. The muted moves followed a technology-driven selloff in the prior session that hit megacap and growth names hard.
Nvidia clocked sharp losses as yields spiked, and the Philadelphia semiconductor index fell close to 5% on Tuesday. The rout carried into Asia overnight, where South Korea's KOSPI dropped 5.7% and Japan's Nikkei fell 3.2%, hit by the same pressure from rising yields and renewed weakness in semiconductor stocks.
Bond yields squeeze equity valuations
Europe's Stoxx Europe 600 held near two-week lows on Wednesday after logging its worst single-day drop in nearly a month a day earlier. Germany's DAX slipped 0.1% while France's CAC 40 edged 0.3% higher, and Britain's FTSE 100 and Spain's IBEX 35 each fell 0.2%.
The moves followed a jump in Germany's 10-year Bund yield to 3.22%, its highest level since May 2011, while the U.S. 30-year Treasury yield surged past 5.30% in the prior session before holding near 5.28% on Wednesday, close to its highest level since 2007. Higher risk-free yields raise the discount rate applied to future corporate cash flows, which hits growth and duration-sensitive sectors hardest and encourages investors to rotate out of stocks and into government debt.
ECB and Fed policy paths in focus
According to ECB Chief Economist Philip Lane: Eurozone inflation, near 3%, remains "well above" the central bank's 2% target, even as price pressures have eased from earlier double-digit peaks. Money markets are now almost fully pricing in a 25-basis-point ECB rate hike at the September meeting, abandoning earlier bets on a prolonged pause.
Adding to inflation concerns, Brent crude futures rose 1.1% to their highest level in three weeks as U.S. President Donald Trump said no talks were taking place with Iran while insisting the Strait of Hormuz remained open, contradicting Iran's assertion that the waterway was shut.
Traders now see at least one 25-basis-point Fed rate hike by the end of 2026, according to LSEG data. However, the odds of a September move have fallen sharply since last week's tame inflation print. Markets await the Federal Reserve's July FOMC minutes later Wednesday, along with remarks from Lagarde, for clearer signals on how policymakers view the recent surge in long-end borrowing costs.
Sources: Investing.com, Investing.com, Coinpedia (snippet-based)
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