S&P 500 futures are under pressure in premarket trading as traders are worried about the rising number of new coronavirus cases in China and elsewhere in the world.
China has recently reported its biggest daily increase in the number of new COVID-19 cases in many months. The country is trying to contain the outbreak in the Hebei province which is located near Beijing and has already implemented strict virus containment measures.
Meanwhile, Malaysia decided to impose a two-week lockdown as its healthcare system was under significant pressure from the second wave of the virus.
The rebound of Asian economies was one of the main drivers of the rebound of the world economy after the first wave of the virus, and traders are worried that the second wave of the virus in Asia may hurt the recovery.
Rising Treasury Yields Put Pressure On Precious Metals
Traders expect that Democrats will soon introduce a new coronavirus aid package. These expectations have led to a sell-off in the bond market, and the yields of 10-year U.S. government bonds have exceeded 1.10%. At the end of the previous year, these yields were in the range between 0.90% and 0.95%.
The rapid increase in yields put material pressure on gold and silver which pay no interest.
At this point, it looks like gold and silver mining stocks will have another challenging trading session. If Treasury yields continue to increase, the sell-off in the precious metals space may continue.
U.S. Dollar Continues To Rebound
The U.S. dollar gained strong upside momentum and is moving higher against a broad basket of currencies despite stimulus expectations.
Rising Treasury yields may be providing some support to the American currency. It should be noted that shorting the dollar was an overcrowded trade, so many traders may have rushed to exits at the same time, creating a short squeeze.
If the U.S. dollar continues to move higher, it may put more pressure on stocks and commodities. At this point, the impact of dollar’s strength on markets is not strong as it is rebounding from multi-month lows, but the continuation of this rebound may serve as an additional obstacle on the way up for stocks.