LONDON, March 11 (Reuters) - Morning Bid U.S.
What matters in U.S. and global markets today
By , Editor-At-Large, Financial Industry and Financial Markets
The recent stock selloff has erased nearly all post-election gains, risking a momentum-driven downturn unless there are changes in the darkening economic outlook or the uncertain U.S. trade policy stance.
While observing the market turbulence in the U.S., attention today shifts to European defense spending restructuring and its potential impact on joint borrowing among European Union countries.
For more details concerning the Wall Street downturn, please see below.
Today's Market Minute
The market's significant decline
Monday saw major milestones in the U.S. market reversal.
The S&P 500 plummeted 2.7%, marking its worst performance of the year and closing below its 200-day moving average for the first time since 2023. 'Big Tech' giants took a hit, with the tech-heavy Nasdaq experiencing a 4% loss, a first since 2022, and the hitting its highest level since last August.
Tesla notably fell by 15%, bringing its decline to over 50% from its peak in December.
Concerns were not only limited to stocks; the credit market also showed signs of distress, with premia on high-yield U.S. corporate bonds widening compared to U.S. Treasuries.
The reasons behind Monday's downturn were not clear, but ongoing trade tensions and a softening job market, along with acknowledgments of economic risks by President Donald Trump and were contributing factors.
Worries about worsening household finances were highlighted in the latest consumer survey, with more people expecting higher unemployment in the coming year.
Despite the Fed indicating a hold on interest rates, investors sought refuge in Treasuries, pushing two-year yields to their lowest point since October and increasing bets on potential Fed easing in 2025.
The dollar also weakened to a new low for 2025.
As major banks downgraded U.S. equity recommendations, global anxiety spread, showing in the negative turn of the MSCI's all-country stock index for the year so far.
Nevertheless, futures and overseas markets stabilized with minor gains early on Tuesday.
Now, attention turns to potential transformative changes in Europe.
The emergence of Euro defense bonds?
The European Union's recent joint borrowing initiative for defense is seen as just the tip of the iceberg in defending the region, leading some to speculate about the potential introduction of defense bonds in the EU.
For global investors seeking to diversify beyond the increasingly isolationist U.S., the creation of a liquid AAA-rated supranational sovereign debt pool in Europe is becoming intriguing.
Expanding EU joint borrowing beyond the current "Next Generation" recovery funds, totaling over 800 billion euros ($866.88 billion), could significantly exceed 1 trillion euros, rivalling major domestic government debts in countries like Germany, Italy, and France.
Recent commitments by EU leaders to boost defense spending and support Ukraine amid shifts in U.S. military and trade alliances have prompted discussions about the necessity of increased joint funding for defense efforts.
"If joint funding for EU defense is pursued, it could alleviate the burden on individual countries and bolster military capabilities in the region," suggests Carsten Nickel of advisory firm Teneo.
As discussions progress, the prospect of EU defense bonds may offer both financial benefits and political leverage, potentially reshaping European defense alliances.
Today's Chart
The current market situation has seen a reversal of post-election gains, with prominent companies like Tesla experiencing significant declines in value.
Today's Key Events
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