After a brief respite on Monday, financial market switched to risk-off mode on Tuesday as both US and UK traders came back from a long weekend.
In the equity market, yesterday's optimism has completely disappeared with equity indices blinking red across the screen. Asian market closed in negative territory with the Nikkei down 0.55% and the CSI down 0.76%.
In Europe, the picture in not brighter as the German DAX fell 0.58%, the STOXX 600 0.68% and the SMI 0.61%. Italian stocks are by far the worst performer – the FTSE MIB gave up 1.70% - amid renewed about the country’s political future. Italian sovereign bonds went through another sell-off this morning with the 10-Year yield jumping as high as 2.93%, up 25bps from yesterday’s close. The 2-Year currently stands at 1.57%, up 67bps.
In the FX market, investors sold the single currency and took shelter in safe-haven ones. The Japanese yen was in solid demand and rose 0.50% against the greenback. USD/JPY kept grinding lower and hit 108.79. The closest support lies at 108.65 (low from May 4th). EUR/CHF is currently testing the 1.1450-1.15 support area (low from late February and psychological level). A break of the support would open the road towards 1.12. However, the downside in EUR/CHF may be limited by the strength of USD/CHF (flat at 0.9935 today).
The Italian - and to some extend the Spanish – situation will continue to drive short-sentiment as market participants are concerned that the League and the 5-Star Movement will ask for snap elections, which would ultimately increase in the uncertainty. This environment will therefore remain euro negative.
Disclaimer: While every effort has been made to ensure that the datat quoted and used for the research behind this document is reliable, there is no guarantee that it is correct, and Swissquote Bank and its subsidiaries can accept no liability whatsoever in respect of any errors or omissions, or regarding the accuracy, completeness or reliability of the information contained herein. This document does not constitute a recommendation o sell and/or buy any financial products and is not to be considered as a solicitation and/or an offer to enter into any transaction. This document is a piece of economic research and is not intended to constitute investment advice, nor to solicit dealing in securities or in any other kind of investment.
Although every investment involves some degree of risk, the risk of loss trading off-exchange forex contracts can be substantial. Therefore if you are considering trading in this market, you should be aware of the risks associated with this product so you can make informed decisions prior to investing. The material presented here in not to be construed as trading advice or strategy. Swissquote Bank makes a strong effort to use reliable, expansive information, but we make no representation that it is accurate or complete. In addition, we have no obligation to notify you when opinions or data in this material change. Any prices stated in this report are for information purposes only and do not represent valuations for individual securities or other instruments.