U.S. equity markets are trading lower this morning ahead of the opening in New York. Although the markets closed higher on Tuesday, they started to peel back gains about mid-session on concerns about consumer discretionary stock losses and a slow down in global growth.
Recent weakness in U.S. economic reports have been driving up demand for risk, but last night’s break appears to have started as traders reassessed the U.S. economy’s impact on continued global growth. Investors are also taking risk off the table after more information about the European bank stress tests was revealed.
European regulators are expected to reveal today how they intend to test the health of the Euro Region’s banks. The purpose of the tests is to simulate the impact of a severe economic shock to the banking system. The regulators will be attempting to restore confidence in the markets, but investors appear to be skeptical about the credibility of the test results. Many feel that the tests will not be stringent enough. This is raising concerns this morning which is leading to long position paring and the subsequent selling of riskier assets.