Breaking News
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Wednesday, May 30: Five Things Markets Are Talking About

By Dean PopplewellMarket OverviewMay 30, 2018 09:53
Wednesday, May 30: Five Things Markets Are Talking About
By Dean Popplewell   |  May 30, 2018 09:53
Saved. See Saved Items.
This article has already been saved in your Saved Items

The Bank of Canada (BoC) is expected to leave its benchmark interest rate unchanged (+1.25%) during its policy meeting today amid concern over slowing housing markets and stalled NAFTA trade negotiations.

However, market consensus expects the BoC’s next rate increase to come in July, as long as Q2 economic growth looks strong and housing markets begin to stabilize.

Note: The BoC has lifted its key rate three times since last summer, most recently in January. Last month, Canadian policy-makers said further rate increases would likely be warranted over time, but added that the BoC would remain cautious and use incoming economic data to guide their decisions.

Currently, Canadian house prices are cooling in many cities following the introduction of tougher mortgage financing rules earlier this year. Sales of existing homes have fallen nearly 3% in April y/y, while prices on an annual basis rose at the slowest pace in nearly a decade.

Net result, a slight softening in recent economic data along with uncertainty over trade with the U.S. is expected to keep the BoC on hold.

Elsewhere, the sovereign bond market is showing signs of stabilization overnight after the impressive rout in Italian debt sent investors seeking the exit doors. U.S. Treasuries have fallen back with the ‘mighty’ dollar as the haven bid subsided, the EUR has climbed and Euro stocks are somewhat steady.

In technical terms, the market is catching its breath while the prospect of snap Italian elections – which could effectively become a referendum on the ‘single’ unit – continues to threaten, the market sees the intraday selloff as overdone while the timing of any vote remains unclear.

On tap: E.U. trade chief Cecilia Malmstrom and U..S Commerce Secretary Wilbur Ross are scheduled to meet today in an informal WTO meet in Paris. Bank of Canada (BoC) monetary policy announcement at 10 a.m. EDT.

1. Stocks mixed results

In Japan, the Nikkei tumbled to a six-week low overnight after political turmoil in Italy sparked concerns over the stability of the eurozone, hitting financial and exporter shares in particular. The Nikkei ended 1.5% lower and managed to stay above its 75-day moving average, which has become the index’s immediate support level. The broader Topix fell 1.4%.

Down-under, Aussie stocks did not fall as much as others in the region as the S&P/ASX 200 fell for the eight consecutive session. It dropped 0.5% as financials shed 1.4% and hit a 18-month low amid the global selloff seen amid worries about Italy and the subsequent slump in U.S. Treasury yields. In South Korea, the KOSPI was one of Asia’s bigger decliners overnight. The Kospi fell 2%, the most since late March and an eight-week closing low, as Samsung (KS:005930) slid a further 3.5%. That put the week’s drop to date at 6.1%.

In Hong Kong, stocks fell to a three-week closing low overnight; with investor sentiment dampened by the political crisis in Italy and renewed fears over a Sino-U.S. trade war. The Hang Seng index fell 1.4%, while the Hang Seng China Enterprise (CEI) lost 1.6%.

In China, equities fell the most in more than two months overnight, with the Shanghai Composite Index hitting a 19-month closing low, amid a global selloff provoked by global geopolitical worries. The blue-chip Shanghai Shenzhen CSI 300 index fell 2.1%, while the Shanghai Composite Index dropped 2.5%.

In Europe, regional bourses have opened broadly flat with a hint of positivity. Waning concerns over periphery elections supports is supporting stocks, with Italy and Spain outperforming core Europe.

Indices: Stoxx50 -0.1% at 3,424, FTSE +0.1% at 7,642, DAX +0.4% at 12,711, CAC 40 -0.6% at 5,406; IBEX 35 +0.3% at 9,555, FTSE MIB +0.8% at 21,517, SMI (CS:SMI) -0.3%, S&P 500 Futures +0.2%

Brent Crude for May 29-31, 2018.
Brent Crude for May 29-31, 2018.

2. Oil slips, as threat of OPEC boost weighs, gold lower

Oil has slipped again overnight, under pressure from expectations that OPEC will pump more and as Italy’s political crisis increased investors’ aversion to risk.

Brent is down 3c at $75.36 a barrel, after trading as low as $74.81 earlier. U.S. crude is up 3c at $66.76.

Brent crude has dropped $5 from its four-year high of $80.50 a barrel on May 17, after reports that OPEC and Russia may increase supply at next month’s OPEC meeting (June 22), reversing policy after 17 months of cutting supplies.

Note: OPEC and non-OPEC producers have had a pact to curb output by about 1.8m bpd since January 2017. The cutbacks have largely removed excess global inventories.

Amid concerns the price rally has gone too far, Saudi Arabia and Russia are discussing raising OPEC and non-OPEC oil output by around 1 million bpd.

Ahead of the U.S. open, gold prices had edged a tad lower overnight as a robust U.S. dollar weighed on the market, but concerns about political turmoil in Italy and Sino-U.S. trade conflict is limiting losses. Spot gold is 0.2% lower at $1,296 per ounce, while U.S. gold futures for June delivery are down 0.3% at $1,295.40 per ounce.

Gold for May 29-31, 2018.
Gold for May 29-31, 2018.

3. Yield trading not for the faint of heart

Italian bond are rebounding, with the 10-year yield falling as much as 19 bps, to 2.98% as global panic eases. The U.S. benchmark bonds have given up some of yesterday’s gains to send yields back above 2.80%.

Italian government bond yields have pushed away from their multi-year highs from yesterday as the market uses the opportunity to snap up cheap paper.

The two-year government bond, the focus of recent selling, was down 33 bps at 2.095%, having hit its highest level in five years in early trading.

Note: The closely watched Bund/BTP 10-year bond yield spread has tightened 13 bps to 269 bps compared to yesterday’s close of 283 bps.

Elsewhere, the yield on U.S. 10-year Treasuries has climbed 7 bps to 2.85%, the biggest increase in more than two-weeks. In Germany, the 10-year Bund yield has climbed 7 bps to 0.33%, the first advance in more than a week and the largest surge in almost six weeks. In the U.K., the 10-year Gilt yield has gained 6 bps to 1.197%, the biggest climb in almost two weeks.

EUR/USD for May 29-31, 2018.
EUR/USD for May 29-31, 2018.

4. Dollar bulls book some profit

The overnight session has seen a slight reversal in the recent risk aversion flows, with the ‘big’ dollar subject to consolidation as some of its interest rate support has eased with the U.S. yield curve flattening. Despite Italian and Spanish political uncertainty, there seems to be less volatility in their respective yield curves.

Earlier this morning, Euro inflation data for May appears to have provided some support for the ‘single’ unit. The EUR/USD has moved back above the psychological €1.16 handle (€1.1615) to recover from its recent 10-month lows.

GBP/USD little changed at £1.3266, while USD/JPY trades atop of ¥108.78 ahead of the N.Y. open.

In EM markets, the TRY has jumped 0.6% to $4.5211, the strongest in more than a week.

USD/INR for May 29-31, 2018.
USD/INR for May 29-31, 2018.

5. Indonesia raises interest rates again

Indonesia’s central bank raised its benchmark interest rate for the second time in two weeks, in their latest attempt to tame the effects of a stronger dollar.

Bank Indonesia (BI) has lifted the seven-day reverse repo rate to 4.75% from the previous 4.5%, a move that had been widely expected.

Note: It had earlier raised the rate by 25 bps on May 17.

This move is being considered as a pre-emptive, front-loading and ahead-of-the curve policy response.

The INR has strengthened 0.1% outright after falling to a three-year low last week, driven by a broad-based advance in the ‘big’ dollar.

Note: The INR has depreciated 3% outright so far this year, despite BI spending billions of dollars to curb that slide. The currency fell as much as 4.5% for the year at its low last week.

US Dollar Index for May 29-30, 2018.
US Dollar Index for May 29-30, 2018.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Wednesday, May 30: Five Things Markets Are Talking About

Related Articles

FactSet Research Systems Inc
Podcast : Financial Market Preview - Friday 22-Oct By FactSet Research Systems Inc - Oct 22, 2021

US futures are indicating a largely flat open as of 05:00 ET. European equity markets are trading higher, following mostly firmer levels in Asia. Evergrande (HK:3333) reportedly...

Wednesday, May 30: Five Things Markets Are Talking About

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email