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Premarket: Stocks in steep selloff as bond yields keep rising Add to ...

A nasty day in global markets is taking shape, as investors continue to fret over the possible withdrawal of central bank monetary stimulus at a time when China's growth rate is slowing and long-term interest rates are rising.

U.S. and Canadian stock futures are down nearly 1 per cent this morning, with most key European and Asian markets down more than 1.5 per cent. Commodities are sharply lower as well, suggesting the selloff on the TSX could even be sharper than on Wall Street. The 10-year U.S. Treasury yield has hit another 14-month high, and the yield on its Canadian counterpart is moving up in sympathy.

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Adding to what appears will be a tough day for the TSX will be Lululemon Athletica Inc., which is set for one of its biggest tumbles in its history after it announced the planned departure of its CEO late Monday.  

The selloff kicked off in Japan once again, where its central bank announced it will make no changes to its monetary policy, disappointing some market players who were betting the Bank of Japan would extend the duraction of its ultra-low interest rates to banks. The yen moved sharply higher - not a welcome development for the country's exports. The U.S. dollar fell to about 96.78 yen from 98.64 late Monday in North America.

Sentiment in Asia had already been bruised by several disappointing economic reports this past weekend in China, including a lacklustre showing on exports.

In Europe today, investors will be keeping a close eye on a supreme court hearing in Germany, which will be deciding on whether European Central Bank President Mario Draghi was within his legal rights last year when he announced a program to buy bonds to prop up the euro-zone economy - a policy known as Outfight Monetary Transactions. Some market participants are fearful that the bond buying program could be capped to a certain amount.

That issue of possible central bank withdrawal of stimulus will be at the forefront of the market's attention here in North America as well today, as investors continue to debate whether the U.S. Federal Reserve may be close to tapering its own bond-buying program. 

Now, here's the detailed rundown of markets this morning and what's to come.

MARKETS:

Equities:

Futures: S&P Toronto -0.96 per cent; S&P 500 -0.85 per cent; Dow -0.75 per cent; Nasdaq -0.85 per cent

Hong Kong's Hang Seng -1.20 per cent

Shanghai composite index Closed for holiday

Japan's Nikkei -1.45 per cent

London’s FTSE 100 -1.40 per cent

Germany’s DAX -1.42 per cent

France's CAC 40 -1.56 per cent

Italy's FTSE MIB -1.78 per cent

Commodities:

WTI crude oil (Nymex July) -0.77 per cent at $95.03 (U.S.) a barrel

Gold (Comex Aug) -1.28 per cent at $1,368.60 (U.S.) an ounce

Copper (Comex July) -1.47 per cent at $3.19 (U.S.) a pound

Currencies:

Canadian dollar down 0.0046, or 0.47 per cent, at $0.9764 (U.S.)

Bonds:

U.S. 10-year Treasury yield 2.21 per cent, up 0.05

Canada 10-year government bond yield 2.20 per cent, up 0.06

ECONOMIC INDICATORS TO WATCH:

No major reports scheduled.

STOCKS TO WATCH:

Lululemon Athletica Inc. shares are down 13 per cent in the premarket after announcing late Monday that CEO Christine Day will step down after the board names a successor. Analysts are already chopping their price targets on the stock and at least two of them - from UBS and Sterne Agree - have downgraded the company to "neutral" ratings.

Kinross Gold Corp. shares are down 6 per cent in the premarket after announcing late Monday that it is halting development at its Fruta del Norte gold project in Ecuador after failing to reach an agreement with the government over a windfall tax on revenues. Canaccord Genuity downgraded the stock to "hold" from "buy" on the news.

Dole Food Co. shares jumped more than 15 per cent in the premarket after David H. Murdock offered to buy the companhy at $12 per share in cash. It's an 18 premium to the closing price Monday.

THIS MORNING'S TOP INVESTING READS ON THE WEB:
 

The bear case for equities.

If yields continue to rise, bond funds can and will deliver negative returns even after accounting for interest payments.

This innovative new strip bond ETF for Canadians may be worth a look for those seeing a fixed-income prodct combining the tax-efficiency of GICs and the liquidity and security of government bonds.

Second-quarter earnings guidance among S&P 500 companies was among the most negative on record.

A strange occurrence in the derivatives market suggests the bond sell-off is different this time.

Low volume investing strategies got crushed in May.

The three worst financial predictions of the last five years.

Buyer beware: hedge funds are about to advertise.

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The premarket report is constantly updated to reflect the latest news developments and market moves. For instant headlines on breaking economic and corporate news in the premarket, follow Darcy Keith on Twitter at @eyeonequities.

Follow on Twitter: @eyeonequities

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