Global Stocks Slide On Italian Bank Worries; Dollar Dips


Dollar Caution

European shares dipped and U.S. equity-index futures (-0.3%) pointed to a lower open as traders questioned the stability of the Italian banking sector ahead of next weekend’s referendum as well as the longevity of the Trumpflation rally, pressuring the dollar, sending the USDJPY sliding as low as 111.355 overnight, before rebounding over 112. That was the dollar’s biggest fall against its Japanese rival since October 7 and against a basket of top world currencies it was the greenback’s worst day since November.

The euro rose to an 11-day high $1.0686 as it got a lift too from the election of Francois Fillon as the center-right candidate in next year’s French presidential election. The reformist former prime minister is now favorite to become president, with a flash opinion poll showing he would easily beat National Front leader Marine Le Pen in a run-off second round. Markets worry the far-right Le Pen, who has promised a referendum on membership of the European Union if she wins, would threaten the future of the currency bloc.

“It’s a bit of a pull back in the dollar,” said Societe Generale strategist Alvin Tan. “The fall in oil is pushing back U.S. bond yields and that is leading the consolidation in the dollar.. there is more scepticism about an (OPEC) output cut now.”


  • European equities enter the North American crossover lower as ongoing concerns surrounding Italian banks and downside in energy names hampers sentiment.
  • FX markets have seen some correct moves in the USD with USD/JPY lower by just under a point while EUR/GBP has been supported by month-end flows.
  • Looking ahead, highlights include potential comments from ECB’s Coeure and Draghi.

“The yield on 10-year U.S. Treasuries dropped almost 5 basis points to 2.323%, off its 16-month high of 2.417% touched last week.”

Global yields dipped as dollar weakness, and thus a brake on inflation expectations, sent Treasuries around the world modestly higher, however the one outlier was once again German 2Y yields, which dropped to fresh record lows on continuing fears about European collateral scarcity.

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