Financial Markets Summary 25 May 2018

Political uncertainty in peripheral Europe was the main talking point this afternoon.

(Reports by Sigma Squawk)

European Closing Report

Italian government borrowing costs rose amid the prospect of a Euro-sceptic Finance Minister while Spanish yields jumped on reports of a possible confidence vote – the Italian/German 10Y spread hit its widest since 2014. 

Equity markets eased back from their best levels as a result with European bourses mixed at the closing bell (FTSE +0.3%, DAX +0.6%, CAC -0.1%, FTSE MIB -1.4%). We saw a mixed open on Wall Street meanwhile as energy stocks weighed on the broader market as oil prices tumbled. 

US crude futures are down over three-percent amid concerns that the major oil producers could boost output. US government bond yields are also in the red but the Dollar has still risen against most of the majors with the Dollar Index rising firmly above the 94 level. Data impulses were largely ignored including a mixed durable goods report and downward revision to Michigan Sentiment. 

We also heard from Dallas Fed President Kaplan who said his base case is for three rate hikes this year, adding that he would want to see sustained GDP growth to back four hikes. He also said he would tolerate some moves above two-percent inflation. 

Fed Chair Powell did not address monetary policy or the economic outlook in his remarks. Still to come today, we expect comments from Fed President’s Evans, Bostic and Kaplan who speak at an event from 16:45 BST while the Baker Hughes rig count follows at 18:00 BST.

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