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Global markets Sell off as Italian turmoil continues; Dow Jones – DAX losing triple figures; EURUSD continues plunge back in the 1.15 handle

May 30, 2018 | Daily Market Outlook

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US markets – returned to trade on Tuesday facing worsening developments in Italy. This was the key influence in last night’s session that drove most markets lower. Chinese trade and concerns about a global credit blight and interest rates appeared to weigh on U.S. financial stocks. Futures started coming off in out of hours and failed to find buyer support, into the European session the Italian issue continued to weigh. Goldman Sachs, Boeing, and J.P. Morgan Chase. Drove the Dow lower at one stage the index traded 500 points in the red. Financial Select Sector SPDR (XLF) exchange-traded fund fell 3.34 percent.

“The more recent bout of political turmoil spanning across a number of member countries coupled with a clear loss of economic momentum in the region has investors questioning the sustainability of the recovery and the future of the bloc,” Lindsey Piegza

The major indexes all finished lower; the Dow Jones -391.64 – The S&P500 -31.47 and the NASDAQ -37.26

Europe – Italy continued as the main driver, Italy’s FTSE MIB fell 2.65 percent as Europes third-largest economy continues with no government after its anti-establishment political groups abandoned their efforts to form a coalition over the weekend. Fresh elections are expected.  A lot of jitters in Europe right now of a euro zone break-up risk in Italy and political turmoil in Spain, news the country’s Prime Minister, Mariano Rajoy, is due to face a confidence vote over his leadership on Friday. The announcement compounded political volatility in southern Europe.

The banking sector led the losses Tuesday, losing almost 3.2 percent, on pace for its worst day since August 2, 2016. Spanish lenders Banco Santander and Caixabank and Italian lender Unicredit were among the worst performers in the sector.

Heavy loses on the main indexes; the FTSE lost 97.64 – the DAX tanked by 196.95 and the CAC dropped 70.87

Oil – USOUSD ended 36 cents higher after a choppy session of trade. Price traded in a 150 cent range tresting 67.28 to the upside and 65.85 to the downside. Output continues to be a leading factor for price, there’s expectations that Saudi Arabia and Russia would pump more crude to ease a potential supply shortfall. Saudi Arabia and Russia have discussed raising OPEC and non-OPEC oil production by some 1 million barrels per day. The spread between Brent and WTI stands at nearly $9 a barrel, its widest since March 2015. “Rising anticipation of a gradual exit from the OPEC-led output-cut agreement has continued to weigh on oil prices in today’s trading session,” said Abhishek Kumar, a senior energy analyst at Interfax Energy Global Gas Analytics, adding that the devil will be in the detail when the cartel meets in June.

Forex – one-way traffic last night as safe havens lead the charge. Political uncertainty lead the flight to safety. There were some big declines from the majors to the USD and the Yen. The EUR and GBP saw the heaviest selling. The EURUSD lost 86 pips, closing back in the 1.15 handle. The pair has been dumped losing 833 pips since April. The EURJPY lost 169 pips. Sellers have trimmer over 500 pips since the 22nd of May. The GBP and AUD also finished in the red not escaping the rush out of risk.

Gold traded in a very wide range as it was looked to for safety and dropped due to the USD demand. It ended the session $1.10 higher after reaching gains of $8.20 and a decline of $4.85. Bitcoin bounced back overnight, buyers added 352. The 4H chart show’s a support low at 7110 we would like to see this level hold to show buyers are looking to extend the current counter-rally.

This morning we’re seeing further selling of risk to the JPY and USD.

Good trading from Eightcap.

Sources; CNBC All times are AEST

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