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.”
Share
