Market watchers continued to keep close tabs on Italy’s political situation, with one development bringing in more uncertainty after another.
The euro continued to take heavy hits while the yen emerged on top thanks to strong risk-off flows. The safe-haven dollar and the lower-yielding franc were also able to take advantage of market anxiety.
- U.S. CB consumer confidence index up from 125.6 to 128.0 vs. 128.2 forecast
- U.S. NAHB S&P/CS Composite HPI unchanged at 6.8% vs. projected dip to 6.5%
- Canadian gov’t to buy Kinder Morgan pipeline
- New Zealand building consents down 3.7% in April after earlier 13% gain
- Italian PM-designate Cottarelli to meet with President Mattarella again today
Italy headed for snap elections?
Following the political drama over the past few days, more and more folks keep buzzing about the likelihood that Italian PM-designate Cottarelli would be unable to form a solid cabinet.
You see, he was expected to announce his ministers earlier on but feared that this would simply lead to a vote of no confidence. Now this could lead to a snap elections situation as early as July 29 because it could force President Sergio Mattarella to dissolve parliament and call for another round of polls in a couple of months.
Both are scheduled to have another meeting today, but a senior state official shared that Cottarelli made need more time to iron things out. For now, members of the anti-establishment the Five Star Movement, the anti-immigrant League, and the Forza Italia party remain opposed to his cabinet picks.
Risk aversion lingers
U.S. equities were dragged lower by investor uncertainty, with EU breakup fears resurfacing and global growth prospects dampened, while gold shored up safe-haven gains.
- Dow 30 index is down to 24,361.45 (-1.58%)
- S&P 500 index is down to 2,689.86 (-1.16%)
- Nasdaq is down to 7,396.59 (-0.50%)
WTI crude oil also stayed in the red on growing concerns that the OPEC could make adjustments to its output deal next month.
- Gold rose to $1,302.96 per ounce (+0.40%)
- WTI crude oil fell to $66.84 per barrel
- Brent crude oil also dipped to $75.52 per barrel
U.S. bond yields ticked higher as investors fled to safety.
- U.S. 5-year yield is up to 2.587% (+0.44%)
- U.S. 10-year yield is up to 2.788% (+0.73%)
- U.S. 30-year yield is up to 2.982% (+0.52%)
Major Market Mover(s):
The euro pulled up slightly early in the session but crashed through several support levels as it was hammered by the ongoing political turmoil in Italy, as well as Spain.
EUR/USD retreated to a high of 1.1590 before tumbling back down to a low of 1.1519, EUR/JPY fell below the 125.50 mark to a low of 124.63, EUR/GBP is testing .8700, and EUR/AUD slid below 1.5400 to a low of 1.5314.
Extended risk-off action supported the lower-yielding yen as it outperformed the rest of its peers throughout the session.
USD/JPY fell from a high of 109.11 to a low of 108.11, GBP/JPY tumbled to 143.22, AUD/JPY slid from 82.15 to a low of 81.03, and NZD/JPY slipped to 74.80.
Watch Out For:
- 11:50 pm GMT: Japanese retail sales y/y (0.9% expected, 1.0% previous)
- 12:00 am GMT: BOJ Governor Kuroda’s testimony
- 1:10 am GMT: RBNZ head Orr’s testimony
- 1:30 am GMT: Australian building approvals (-2.9% expected, +2.6% previous)