The European equities are following their pummeled Asian counterparts lower, with the Stoxx 600 at its lowest levels since January 2017. All European stock sectors slumped, with weakness in commodities and metals weighing on oil and basic-resource names. The FTSE MIB is set to enter the bear-market territory, as local banks pare initial strength to trade lower by 0.7%.

The USD is down 0.3%, while the SEK outperformed in Group-of-10 Forex after inflation data exceeded market consensus.

Yield curves have a flattening bias and the market continued to punish Italian bondholders. The Italian short end has risen by approximately 20bp since the market open. U.S. yields are broadly steady ahead of CPI data.

Reassurances from the Lower House Budget Committee Head did little to inspire participants in this morning’s Italian debt offering with auction bonds languishing around session lows.

In the key headlines for the European session:

  • German Eco Min cuts 2018 GDP growth forecast to 1.8% vs 2.3% April prediction; proposes reducing the tax burden on companies by EU20b a year
  • China open to resuming investment treaty talks with the US: Commerce Min
  • Trump says Fed is “going loco,” is making a mistake on rate hikes
  • Mnuchin says not surprised market is having ’somewhat of a correction’; the U.S. is concerned about Chinese yuan depreciation
  • Evans says Fed could move to a “slightly restrictive” stance and then pause at some target range above 3%; “extremely pleased” with inflation uptick


Disastrous conditions continue to weigh down the European stock market after the Asian and American counterparts took their share of the beating and passed it around. The European market continued to experience the downward movement as the Italian crisis took a back seat to the current issue.

Over in the U.S., the market remains in turmoil as the U.S. President criticized the Federal Reserve calling the “loco” due to their tightening monetary policy which is against. The U.S. is yet again selling bonds this time focusing on the ultra-long terms of 30-year bonds, while data includes the release of the inflation indicator CPI and the Jobless Claims. The focus will be more on the CPI as it will be a testament to see if the FED is on the right path with monetary tightening while the Jobless claims will also give a glimpse on the employment situation of the U.S.

The speakers for the day only include the Kansas City Fed President Esther George who is an alternate voter, and a hawk, meaning that should she touch on the monetary side of things, she would be defending an increase in rates against President Trump’s comments which might provoke another downward hill movement in stocks.


Euro-area bonds rallied after stocks slumped around the world, but there was little sign of panic in the currency market, with haven assets failing to get any meaningful bid; the krona led gains among its Group-of-10 peers on speculation Sweden’s swifter-than-forecast inflation will spur the Riksbank to raise rates as soon as December.

EUR/USD – Long-legged doji, indicative of mean reversal, plays out; overall picture remains bearish as long as short-term DMAs hold.

GBP/USD – Bloomberg Trender Indicator turns bullish as cable closes above 1.3171; first stop on the upside at 1.3298.

USD/JPY – Healthy correction of the rally since March unfolds, with 55-DMA now in focus.

AUD/USD – Studies suggesting a relief rebound meet bearish price action.

EUR/CHF – Bullish trend exhaustion signals keep accumulating as a bearish engulfing line formed Monday; 55-DMA support in sight.