Mid-session Europe: Dax closing in on 2-month low
All the major European indices were on the back foot Monday and while oscillations are likely over the next week or so, the risk-off flight has to put traders on the defensive until we get to the other side of June 23.
ECB to release how much it has spent on Corporate Bond since June 8 (1545 GMT)
EURUSD is not doing much today with a lack of economic releases. The pair is stuck between a 10-day moving average at 1.1276 and a 21-day moving average at the 1.1236 area. Technically, EURUSD closing below the 1.1294 area last week (a Fibo level from the drop starting May 3) is a good indication for the USD bulls. Technical levels of note other than the 1.1294 tech resistance now are 1.1313 (the 55-day moving average) and the 100-day moving average down at the 1.1211 area. Looking at the 200-day moving average at around 1.1100, it is starting to flatten around this level and could be the line in the sand that needs to be taken out for USD moves lower.
All focus in the option market is now on the EU referendum and will likely stay like that until we are over it. Vols are all correlated with the likelihood of a Brexit. Vols all opened a lot higher from Friday levels, with Brexit now at a 35% likelihood looking at the betting market. GBPUSD overnight forward vol for 23jun/24jun is around 127 vols (750 pips for a straddle), which is the highest we have measured so far. Liquidity is getting worse and spreads are widening across all pairs. EURUSD spot, however, seems to correlate only very little with the risk of Brexit despite a lot of risk priced in for this pair in case of a Brexit. EURUSD risk reversals are trading historically very skewed for puts over the referendum.
Stocks across Europe dropped Monday, with Germany’s DAX 30 down 1.3% at 9,707.06, on track for its lowest close since April 11. France’s CAC 40 gave up 1.1% at 4,272.32. Italy’s FTSE MIB fell 1.6% to 16,840.06, while Spain’s IBEX 35 shed 1.5% to 8,366.30.
The UK’s FTSE 100 dropped 0.3% to 6,094.86. Bank shares are among the big sliders as investors faced heightened concerns about the Brexit vote on whether the UK should cut ties with the European Union. The moves on European markets followed sharp losses across Asian stocks, as Japan’s Nikkei Average ended the session with a 3.5% slide.
Shares of Italy’s Banca Popolare di Milano fell 6.1%, and Banca Monte dei Paschi di Siena SpA lost 5.6%. German lender Commerzbank AG fell 2.2%, and France’s Credit Agricole SA gave up 2.3%. G4S PLC shares plunged 7% after the security firm confirmed that Omar Matteen, the suspect in Sunday’s shooting at an Orlando, Florida nightclub, was an employee. G4S said its cooperating with law enforcement authorities in their investigation of the shooting that left 50 people dead.
The Dow Jones Industrial Average futures fell 52 points, or 0.3%, to 17,724, while S&P 500 futures dropped 6.3 points, or 0.3%, to 2,081. Nasdaq-100 futures slipped 15.25 points, or 0.3%, to 4,442.75. No key economic data is on the calendar for Monday, but a hefty amount of updates will be sprinkled through out the week, including readings on retail sales and home construction.
shenanigans that took place in Marseilles over the weekend. Photo: iStock
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