If true one step closer in forming a New italian Government
[FOREX WATCH SQUAWK BOX (R)] >>>
[15:40 BUZZ-EUR/USD-5-Star rattles bears further]
* EUR/USD takes out May 29 high and sets a new session high
* Italy’s 5-Star calls for Savona to withdraw candidacy for econ minister
* 5-Star makes request to allow government to be formed
* IT-De and DE-Us yield spreads tighten further to aide EUR/USD’s gains
Spoos Traded up above yesterdays pit highs and Filled gap left from Fridays close. Energy XLE +2.5% as Comments from Saudi arabia hint towards the Group not cutting production at June meeting thus causing a big Short squeeze in oil and Products.WTI and Brent +2%,HO and Gasoil +1.8% and gasoline +1.6% Russell 2000 another new all time high scored today.Italy’s Mib off session highs but likely to end session 1.5% higher . No news is good news from Italy as markets optimistic on formation of A new Government.Treasuries actually cutting some losses not adding to them on the move higher in Spoos/Risk.Maybe yesterday’s market reaction a little over done so a correction today.
In WTI watching 68.94 level as a place where stops maybe centered,a break of this could help push prices higher as shorts provide the fuel.
Grains being sold as the Seasons first Crop progress and condition report released yesterday was a surprise to traders as it showed crops doing better than market had forecast. Wheat -2.8%,Corn -1.8% and Soy -1.26%.
Still watching for any Italian headlines that may turn this Bullish Sentiment sour.
The storm appears to have passed as Italian Bonds are bid after a successful five and 10-year auction this morning. Bid to cover or demand was good enough to assuage fears of an all-out collapse in Italian bond prices and thus a risk on move occurred post Auction. Change in Bps for Italian Bonds: 2s -117,3s -114,10s -30 and 30s -21 clawing back some of yesterday’s losses, MIB Italy’s benchmark Stock index +2% this morning. Some of the optimism in buying Italian Assets comes from comments from the leader of the five star party, Di Maio who called for collation talks to restart. The five star and the league are the two populous parties who are trying to forge a Government, any comments from these groups that shows cooperation is dead and snap elections must be called will weigh on Euro and BTPs. Bunds -129 ticks and Buxl, 30-year bunds -246 ticks. Both Bunds and Buxl are trading below yesterday’s lows. I will be watching yesterday’s lows in Bonds and 10s to see if any stops lay below. Change in yields for treasuries In Bps 2s +8,3s +9 5s and 10s +10 and 30s +7.
RISK on shows all European Stock markets higher Spain and Portugal +~1%,DAx +.7% Stoxx 50 +.3% and Spoos +.5%.Dolalr Index -.5%, JPY -.5% and Euro +.9%.Unwinding yesterday’s moves. Gold trading steady stuck in a tight range Silver and copper little changed this Morning. Yesterday’s Move Lower in Risk was not just all about Italy recall that Trump sparked some worries about a trade war. From Reuters “In an unexpected change in tone, the United States said on Tuesday that it still held the threat of imposing tariffs on $50 billion of imports from China unless it addressed the issue of theft of American intellectual property.” China as expected said they are willing to fight back if Washington wants a trade war. Commerce Secretary Ross will be heading to China this weekend for another round of trade talks.
US economic calendar shows ADP, second revision of GDP, Trade balance and finally beige book. These numbers are of Secondary importance as all eyes will be on news wires to see if Italy can form an Interim Government and not call for new elections.
One comment Oil. It looks Like Saudi Arabia and Russia did not consult all of the members of the production Cut group before saying they will add production. This has ruffled a few feathers in the group and thus possibly causing some delay in raising output.
below is graph of Sovereign spread vs bunds. Top graph Spain,middle Italy and bottom France on daily close. The higher the spread the more worries about Euro zone
1 month generic At the money Bund volatility
Besides the italian Woes weighing On Risk A surprise comment from White House playing a role as well ” US will place restrictions & export controls on in order to protect IP from China, will publish a final list of products subject to the 25% tariffs will be announced on June 15th”
This comment caught US markets and Chinese trade representatives off guard stirring up trade war fears one again.Boeing the Trade war barometer down 1.25% and the SOX ,semiconductor Index another barometer down 1.13%.No material response as of yet from China But markets appear to be pricing in a negative one.
Oil struggling today as now brent down 1% after being positive most of Morning.Calendar spreads trading lower hinting at less demand and or more supply in the future.This Is another negative for stock market.Morgan Stanley Head of Wealth management made comments at A deutsche bank conference this morning saying “Transactional revenues remain slow, expects healthy growth but at a slower rate” .MS down 2% and financials as a sector -3% your loss leader in SPX,An Ugly Day gets uglier.
Treasuries,5s,10s, 30s have not made a new all sessions highs yet.
Big tech trying to Bounce and in turn trying to Pull Spoos and NDX higher.NDX flirted with Unchanged but the sellers too strong at that level for buyers to overcome. I am watching the 10:30 European close to See if US buyers can then gain upper hand.Euro has clawed back most overnight losses and the Bunds have given back almost all her gains, once again all eyes on 10:30 Europe close.the Bund/BTP spread is off some 60 bps from early morning panic highs and Spoos struggling to trade above or below the 2700 handle
Natural gas being sold aggressively -2.8% ,as Cooler temperatures forecast for next 2 weeks and a bump higher in production weigh . Oil complex still indicating that path of Least resistance is down as prices struggle to trade higher with any sort of Confidence,CL -1.5%.Lumber was indicated to open limit bid but that did not come to fruition as Bids were pulled and priced dropped,Lumber has a $19 range today .The justice department announced they will make a statement later today involving a big Anti-trust campaign,Both google and Amazon have traded lower since statement hit wires. Hmmm