According to the market report by Bloomberg, The 10-year Treasuries shot up along with the European Bonds due to deepening political crises in Italy, precipitating global risk-off trading. The Euro lost ground, while the US Dollar strengthened. European stocks saw massive sell-offs.
The benchmark 10-year Treasuries yields in the US touched the 2.8% mark, while the 10-year gilts’ yields fell. Equity futures in the US fell, as did the STOXX Europe 600 Index.
This glum mood extended to Asia too. The MSCI Asia Pacific Index fell after news leaked that Apple may be shifting to next-gen technology for its iPhone screens. The Index fell because of the fall in share prices of iPhone screen manufacturers in region.
The Japanese Yen caused the Topix Index to fall for the seventh straight session, the longest such streak since September 2016.
Back to Europe, the fresh turmoil in the region from both Italy and, to a lesser extent, Spain, have caused people to remember the Euro’s zone’s troubles of the last decade. In Rome, forces for and against Europe are in conflict with each other, and another election is expected to take place as early as September this year, after the parties in Italy were unable to form a government earlier this year in March.
According to a portfolio manager at Oppenheimer Funds Inc., Alessio de Longis, these political developments are causing a lot of concern. He stated that the markets have turned completely because they are losing faith in political parties and don’t believe what they are saying any more. De Longis feels that the markets will not be able to change direction until the Italian situation shows more clarity.
In other parts of the world, the Turkish lira fell when the country’s central bank took action to make its monetary policy simpler. Many of the South Asian markets were closed for trading on Tuesday due to holidays. The day-off extended to markets in Singapore, Malaysia, Indonesia and Thailand.
Global events to watch out for this week are:
- An informal World Trade Organization ministerial will see the meeting between European Union Trade head Cecilia Malmstrom and American Commerce Secretary Wilbur Ross on Wednesday.
- The Employment report for the US for the month of May is due to be released on Friday. This will be the last employment report before the June Federal meeting.
- The US Automakers’ report for May is also due on Friday.
- On Friday, the Chinese stock market will join the MSCI’s global index.
- US Secretary of Commerce Wilbur Ross will then travel to Beijing, China to continue talks with Chinese Vice-Premier Liu He regarding trade between the two countries. The topic of ZTE will also be discussed.
In the stock markets:
- The STOXX Europe 600 Index fell 1.8%, which is its biggest fall in more than 12 weeks.
- The S&P 500 Futures Index dropped 1% to its lowest in the last three weeks. This 1% drop is the highest in the last 5 weeks.
- The UK FTSE 100 Index also fell 1.4% to its worst in 3 weeks. The 1.4% drop is the biggest it has experienced in the last 10 weeks.
- The German DAX Index fell 2%, its worst drop in the last three weeks and the biggest drop in a day in the last 12 weeks.
- The MSCI Emerging Markets also fell 1.1% to its worst in more than 5 months. The 1.1% drop is its worst in the last two weeks.
- The MSCI Asia Pacific Index also fell by 0.4% to its worst in more than 3 weeks.