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Analysts at TD Securities offered a market wrap and explained that North American markets saw a quiet close to the week in contrast to the risk-off session in Europe, where the Italian budget proposal dominated risk sentiment.

Key Quotes:

“US equities were little changed while Canadian stocks closed 0.9% lower.”

“Looking to rates, the Treasury curve flattened on modest buying in the front-end and selling of 30s, while Canadian rates saw the opposite dynamic unfold, widening 2Y CAD-USD spreads by 2bps.”

“The USD traded on a mixed footing against G10 FX, with CAD (+0.9%) leading the advance on a combination of front-end rate spreads and oil prices (WTI: 1.9%).”

“Italian politics weighed on EUR (-0.2%) while antipodeans saw modest gains (AUD: +0.3%, NZD: +0.2%).”

What we’re  watching in markets
“The last 48 hours have seen the market shift to idiosyncratic risk mode. The pain has been most acute in Europe where the one-two punch of Italy and Brexit headlines have smacked the European currencies over the past few sessions. Notably, the EUR is following the beta of the BTP premium and a selloff to 300bp could drive the single currency back to 1.15.”

“We enter the final week of Brazil’s election with the race for the second round firming up. We see a differentiated near-term reaction function for markets, but a difficult time forward for Brazilian assets with either favoured candidate.”

“Treasuries will look to payrolls, ISM and Fed remarks for direction, with particular focus on speeches from Powell next week.”