Dollar, yen, and bonds lead classic risk-off move in European session

Session headlines:

Market data:

• JPY outperforms while NZD trails today
• Brent crude rises 2.8% to $111.88
• 10-year Treasury yields fall 9 bps to 5.05%
• Gold climbs 2.0% to $4,060
• European stocks fall and S&P 500 futures are down 1.0%
• Bitcoin slips 3.4% to $81,738

The classic risk-off market pattern has not been seen for a while, but the current situation is nearly identical.

With geopolitical tensions persisting and equities under severe pressure, old-school risk-off flows are reemerging. The dollar and yen are in demand among major currencies, and bonds are trading higher, meaning yields are lower. The only major exception is in commodities, where oil rises and gold falls.

US-Iran tensions continue to affect risk sentiment, keeping oil markets on edge and pushing Brent crude above $111, its highest since May. At the same time, renewed inflation fears are dragging tech stocks lower, coupled with concerns about the AI rally, as investors question whether massive spending can justify high valuations.

S&P 500 futures are down 1.0%, while Nasdaq futures have dropped 1.7%. In Europe, French fiscal concerns are weighing on sentiment, with the France-Germany 10-year yield spread widening to 170 bps, the highest since 2011. This has reversed yesterday's stock gains, as the DAX fell 0.8% and the CAC 40 declined 1.2%.

Among major currencies, the dollar, yen, and franc are all bid against other currencies. USD/JPY is 0.7% lower at 157.05, while EUR/USD has dropped from 1.1240 to 1.1195 in the session, as the euro struggles amid France's fiscal worries. EUR/CHF is also falling to a three-month low, testing the 0.9200 level.

Gold is under pressure after weeks of consolidation, falling below $4,100 today. This has led to further selling, with gold declining to $4,060, despite Treasury yields also falling, with 10-year yields easing to 5.05% as investors appear to prioritize growth concerns once again.