Market Roundup
• Italy may return to polls in July, sources say, amid market rout.
• Italian bonds suffer worst day in more than 25 years.
• US May Consumer Confidence, 128.0, 128.0 forecast, 128.7 previous.
• US Mar CaseShiller 20 YY, 6.8%, 6.5% forecast, 6.8% previous.
• US Mar CaseShiller 20 MM SA, 0.5%, 0.7% forecast, 0.8% previous.
• US Mar CaseShiller 20 MM NSA, 1.0%, 0.7% previous.
• US May Dallas Fed Mfg Bus Index, 26.80, 21.80 previous.
• Regional Fed banks backed holding discount rate steady – minutes.
• U.S. to continue trade actions against China - White House.
• EU trade chief expects U.S. import caps even if no tariffs.
• EU proposes more spending on Italy and south, less in east.
• Senior N. Korea envoy to hold talks in U.S. about summit.
• Manufacturers slam UK Brexit customs idea as naïve.
Looking Ahead - Economic Data (GMT)
• 29 May 22:45 New Zealand Apr Building Consents, 14.7% previous
• 29 May 23:50 Japan Apr Retail Sales YY, 1.0% forecast, 1.0% previous
• 30 May 01:30 Australia Apr Building Approvals, -3.0% forecast, 2.6% previous
• 30 May 01:30 Australia Apr Private House Approvals, 1.1% previous
• 30 May 05:00 Japan May Consumer Confidence Index, 43.6 previous
Looking Ahead - Events, Other Releases (GMT)
• 00:00 Remarks by Bank of Japan Governor Haruhiko Kuroda at the 2018 BOJ-IMES Conference in Tokyo
• 14:00 Bank of Canada key policy interest rate announcement and monetary policy report in Ottawa
• 14:45 Speech by Swiss National Bank Chairman Thomas Jordan, "Innovation and Entrepreneurship: Success Factors in a Changing Economic World", Award Ceremony De Vigier Foundation in Solothurn, Switzerland
• 18:00 U.S. Federal Reserve issues its Beige Book on economic condition in Washington, D.C.
Currency Summaries
EUR/USD is likely to find support at 1.1469 levels and currently trading at 1.1536 levels. The pair has made session high at 1.1589 and hit lows at 1.1507 levels. Euro declined to hit 10-month low against the dollar on Tuesday after a selloff in Italy's debt market drove investors to dump the single currency. A deepening political crisis in Italy, the euro zone's third biggest economy, provoked selling of Italian assets and the euro that was reminiscent of the euro zone debt crisis of 2010-2012.But the impact was not felt as keenly on currency markets as in Italian government bonds which suffered their worst day in more than 25 years. Italy's president has set the country on a path to fresh elections by appointing a former International Monetary Fund official as interim prime minister, with the task of planning for snap polls and passing the next budget. Investors fear a polarising election campaign which could deliver a deeply eurosceptic government, threatening the bloc’s cohesion. The euro has fallen 4 percent this month amid a resurgent dollar and rising concerns over the euro zone's political and economic situation. The single currency slipped below $1.16 for the first time since November 2017 to hit a 10-month low of $1.1507. The dollar index, which measures the greenback against a basket of six major currencies, was up half a percent on the day at a high of 95.025, hitting a 6-1/2 month top.
GBP/USD is supported in the range of 1.3156 levels and currently trading at 1.3253 levels. It reached session high at 1.3297 and dropped to session low at 1.3202 levels. The pound declined to a six-month low against a dollar on Tuesday as concerns about a deepening political crisis in Italy weighed on the pound. Sterling has slumped against the dollar since mid-April as expectations of a Bank of England interest rate rise recede, the economy shows signs of weakness and worries about whether Britain can secure the Brexit deal it wants reemerge. Against the dollar, the pound slid as much as 0.7 percent to $1.3205, its weakest since mid-November. The British currency, previously one of the best performers in 2018, is now down more than 2 percent versus the dollar so far this year. Versus the euro, sterling has performed much better, and on Tuesday traded flat at 87.31 pence per euro. Worries about divisions within the British government about whether it wants to remain in a customs union with Europe after Brexit have hit sentiment towards the pound ahead of crucial EU summit in June. However, the euro's rapid descent - caused by investors buying into dollars and concerns about political uncertainty in Italy - have underpinned the pound and it remains up versus the single currency in 2018.
USD/CAD is supported at 1.2966 levels and is trading at 1.3017 levels. It has made session high at 1.3047 and lows at 1.2992 levels. The Canadian dollar weakened to a more than two-month low against its U.S. counterpart on Tuesday as oil prices fell and the greenback broadly rose, while investors weighed a decision by Canada's government to purchase a major oil pipeline project. The Canadian government said it will buy Kinder Morgan's Trans Mountain pipeline expansion for C$4.5 billion. Kinder Morgan has been frustrated with delays caused by British Columbia's government, which is concerned about possible oil spills. The price of oil, one of Canada's major exports, was pressured by expectations that Saudi Arabia and Russia could pump more crude to compensate for a potential supply shortfall. Losses for the loonie came ahead of a Bank of Canada interest rate decision on Wednesday. The central bank will probably hold interest rates steady as indebted consumers and uncertain trade policy necessitate caution, a poll predicted.The U.S. dollar rose against a basket of major currencies after a sell-off in Italy's debt market drove investors to dump the euro. The Canadian dollar was trading 0.1 percent lower at C$1.3020 to the greenback. The currency touched its weakest level since March 21 at C$1.3047.
AUD/USD is supported around 0.7474 levels and currently trading at 0.7505 levels. It hit session high at 0.7536 and made session lows at 0.7498 levels. The Australian dollar declined against greenback on Tuesday as a risk-off tone dominated across financial markets amid political uncertainty in Italy and falling oil prices. The Australian dollar eased below a closely-watched 20-day moving average of $0.7526 for its third consecutive day of losses. It was last down 0.3 percent at $0.7503. Risk appetite took a knock amid worries of snap polls in Italy after the anti-establishment 5-Star and League parties abandoned plans to form a government. Investors feared Italy's election campaign could focus on the country's continued membership of European institutions and strengthen the populist parties' hand. Adding to the uncertainty, Spanish Prime Minister Mariano Rajoy will face a vote of confidence in his leadership on Friday. Also weighing on the Aussie, oil prices declined sharply in recent days with U.S. crude futures near the lowest in six weeks. Australia is a major exporter of LNG and petroleum products. Analysts will next focus their attention on U.S. inflation data due later in the week which could provide clues to future interest rate rises ahead of the Federal Reserve's policy meeting next month.
Equities Recap
European shares fell for a second day on Tuesday on fears a new election in Italy, which could become a proxy referendum on its euro membership, might renew the risk of a euro zone break-up.
UK's benchmark FTSE 100 closed down by 1.2 percent, the pan-European FTSEurofirst 300 ended the day down by 1.32 percent, Germany's Dax ended down by 1.6 percent, France’s CAC finished the day down by 1.4 percent.
U.S. stock markets sank more than 1 percent in value on Tuesday on downbeat guidance on trading from JP Morgan and worries over Italy, putting the S&P and Dow Jones Industrial Average on track for their biggest one-day drops in a month.
Dow Jones closed down by 1.59 percent, S&P 500 ended down by 1.16 percent, Nasdaq finished the day down by 0.52 percent.
Treasuries Recap
U.S. Treasury yields dropped to multi-week lows on Tuesday, pressured by declines in the European government bond market as a political crisis in Italy, the third-largest euro zone economy, fueled a flight to safe-haven assets.
U.S. 10-year yields dropped to seven-week lows of 2.759 percent and were last at 2.788 percent.
U.S. 30-year yields fell to 2.954 percent, the lowest level since Feb. 1 and last traded at 2.98 percent.
On the short-end of the curve, U.S. 2-year yields tumbled to seven-week troughs of 2.311 percent. They last changed hands at 2.331 percent.
Commodities Recap
Gold prices rose on Tuesday, but gains were limited as traders weighed a buoyant dollar against a deepening political crisis in Italy that provoked a second day of heavy selling on European financial markets.
Spot gold gained 0.18 percent at $1,300.01 per ounce by 1:36 p.m. EDT (1736 GMT), earlier hitting a five-day low of $1,293.40, while U.S. gold futures for June delivery settled down $4.70, or 0.4 percent, at $1,299 per ounce.
U.S. crude futures fell more than $1 on Tuesday on worries that Saudi Arabia and Russia will pump more crude to boost supplies after more than a year of reducing worldwide inventories.
U.S. West Texas Intermediate (WTI) crude futures fell $1.15 to settle at $66.73 a barrel, a 1.7 percent loss. Brent crude futures settled up 9 cents to $75.39 a barrel.
