Pre-Market: Another Bounce Fails in Europe as EU Summit Begins
After yesterday’s strong intraday reversal on Wall Street, Asian stocks had a relatively bullish session, even as China continues to underperform. The Shanghai Composite is still bleeding lower, dragging Australian and New Zealand assets lower as well, while Japan is faring slightly better, thanks to the Yen’s relative weakness.
DAX, 4-Hour Chart Analysis
European stocks started the day on a positive note too, but selling resumed shortly, as banks continue to be under strong pressure, on the Old Continent and the US alike. The weaker large banks that have been hit hard in Europe during the Italian political crisis haven’t recovered ever since, and several of them, the likes of Unicredit, BNP Paribas, and Deutsche Bank among others hit new lows yesterday.
BNP Paribas, 4-Hour Chart Analysis
Systemic risk has been on the rise hand in hand with emerging market woes, and now, as the US equity juggernaut stalled too, important support levels will likely be tested in Europe and globally. Yield curves also continue to flatten across countries and the segments of the bond market, as investors are more and more wary of the effects of the global tightening cycle.
S&P 500, 4-Hour Chart Analysis
US markets are in for a flat start, with meager gains across the board after the mixed overnight session, and it will be interesting see the major benchmarks’ performance today, as the recent three-week lows will likely be in focus, and although the
As for economic news, Italian inflation came in slightly higher than expected, the US final GDP print missed expectations, while weekly US unemployment claims edged higher. A relatively calm Italian 10-year government bond auction helped sentiment, as incredibly enough, Italian debt is still trading very close to US Treasuries, with the auction settling at a 2.77% yield.
Dollar Ready for Break Out or Fake Out?
DXY, 4-Hour Chart Analysis
All eyes are still on the Dollar and the Euro in forex markets, as the reserve currency is trading near 12-months highs as measured by the Dollar Index after a month of corrective price action. Although investor sentiment is very bullish now towards the USD, technicals suggest another leg higher, even as a fake-out move and a more protracted consolidation is also a possibility here.
The Euro, which could turn volatile during the first day of the crucial EU summit later on, and the Canadian Dollar are slightly higher today compared to the Dollar thanks to the slight rebound in risk assets, while commodities are flat with gold still holding on just above $1250.
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