Financial Markets Summary 22 May 2018

European cash equity markets are broadly higher at the closing bell including the Italian FTSE MIB (FTSE +0.5%, DAX +0.9%, CAC +0.3%, FTSE MIB +0.7%). US cash equity markets are lower at the closing bell with energy and industrial stocks the worst performers (DJIA -0.7%, S&P -0.3%, NASDAQ -0.2%).

European Closing Report

The Italian 10-year yield has dropped around six basis points versus yesterday’s close with recent reports suggesting that 5-Star leader Di Maio could be back in the running for PM. 

We saw a slightly higher open on Wall Street meanwhile although the major bourses have eased back from their best levels in recent trade. The Dollar Index has also recovered from its earlier lows to trade little changed on the day after another quiet afternoon of data – Richmond Fed manufacturing index rose to 16 (f/c. 9) from 3.

Elsewhere in FX, Sterling has given back gains seen in response to hawkish BoE rhetoric from Vlieghe who said his view is that rates will one or two rate increases will be needed each year over the forecast horizon.

Governor Carney meanwhile said households are right to think that interest rates are more likely to go up than not, but at a gentle rate. He also repeated that the first-quarter slowdown is likely due to idiosyncratic and temporary factors, but it is right to wait for more data.

Elsewhere, we heard from the ECB’s Liikanen who said he expects rates to stay low for an extended period after QE ends. He added that it will take time until core inflation will support the development of headline inflation. Still to come today, the US Treasury are to sell $33.0 Bln of 2-year notes.


US Closing Report

Stocks succumb to selling pressure this afternoon as recent optimism surrounding the US-China trade talks faded somewhat. This followed comments from US President Trump who said he was not pleased with how the trade talks with China went. 

He also downplayed the likelihood of the North Korean Summit taking place next month. Elsewhere, US government bond yields have not really budged today with little data to dictate otherwise while the Dollar Index looks set to log only a minor decline. 

US crude futures settled at $72.13 (-$0.15) ahead of the API inventory report at 21:30 BST. In Europe, both the 5-Star and League parties reiterated their support for Conte as PM while League leader Salvini also stressed his opposition to Di Maio as Premier.

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Financial Markets Summary 21 May 2018


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