US Celebrates, The World Levitates

Tyler Durden's picture

The US and UK markets may be closed for holiday today but that doesn't mean that US equity futures can't spin this weekend's resurrection of anti-EU sentiment in Europe, coupled with the just confirmed resumption of the "anti-terrorist" operation in Ukraine (more on that shortly) following its anticlimatic presidential elections in a positive light. They can and they have, and even though the USDJPY low volume ramp is oddly missing overnight, and 10 Years appear bid, spoos are set for another record high, and are already trading up 0.2% at 1901.3, above 1900 for the first time ever.

European shares remain higher with the autos and bank sectors outperforming and food & beverage, basic resources underperforming. The Italian and German markets are the best-performing larger bourses. The euro is little changed against the dollar. Greek 10yr bond yields fall; Italian yields decline.

Market Recap:

  • S&P 500 futures up 0.2% to 1901.3
  • Stoxx 600 up 0.4% to 343.1
  • US 10Yr yield down 0bps to 2.53%
  • German 10Yr yield up 0bps to 1.42%
  • MSCI Asia Pacific up 0.4% to 141.4
  • Gold spot up 0% to $1292.8/oz

FX/Bonds

  • Euro up 0.1% to $1.3642
  • Dollar Index down 0.13% to 80.29
  • Italian 10Yr yield down 12bps to 3.03%
  • Spanish 10Yr yield down 7bps to 2.92%
  • French 10Yr yield up 1bps to 1.83%

Commodities

  • Brent Futures down 0.5% to $109.9/bbl, WTI Futures down 0.3% to $104/bbl

Bulletin headline summary from RanSquawk:

  • News of a majority for Poroshenko in the Ukraine Presidential elections has underpinned positive sentiment which has seen both the DAX and E-mini S&P print fresh all-time highs after tripping good sized stops.
  • Italy has outperformed throughout the session as the EU Parliamentary elections reveal a victory for Italian PM Renzi against the populist challenge.
  • Today’s session is set to be a light one with both US and UK away from market and no tier 1 data to be released.

EU & UK HEADLINES (UK Markets closed for UK Spring bank holiday)

In ECB commentary, ECB's Coeure said ECB may adopt negative deposit rates, but it is too early to say exactly what the ECB will do at its June meeting. (Gazeta Wyborcza) Markets then failed to provide a reaction to later comments from President Draghi who said the ECB must be particularly alert to negative price spiral and the ECB could offer LTROs and buy ABS, whilst inflation expectations may need QE.

Italy has outperformed throughout the session with the FTSE MIB +2.5% and the yield on the Italian 10yr moving down towards the 3.0% level, this comes as Italian PM Renzi defeated the populist challenge in the EU parliamentary elections which signifies resounding support for Renzi's party. With the tightening of the IT/GE spread, the German 10y tripped stops and moved back below the key 146.00 handle.

Prelim Barclays month end extensions show Pan-Euro Agg at +0.04y (Prev. +0.10y), Sterling-Agg at +0.06y (Prev. +0.02y) US

HEADLINES (US markets closed for Memorial Day)

Newsflow from the US remains light, with US markets closed today for Memorial Day and no tier 1 data, Fed speakers or fixed income events on the schedule.

Prelim Barclays month end extensions show US Treasury at +0.13y (Prev. +0.08y)

EQUITIES

Stocks in Europe opened higher (Euro Stoxx +0.7%) and then extended these gains as participants responded to the news that Petro Poroshenko is currently leading the exit polls for the Ukrainian Presidential elections, which follows on from Friday where Russian president Putin said he would work with elected Ukraine President. Volumes are generally light due to UK and US holidays, however the DAX tripped stops on good size through the 9820 level (Jan & May highs) and then 9850 to print a fresh all-time highs. With European equities trading at their highest levels since 2008, the positive sentiment filtered through to US asset classes as the e-mini S&P broke above the 1900 handle to print its own all-time highs.

FX

Despite the strong performance in European equities, FX markets have been resilient to this morning’s price action with most pairs relatively rangebound. However, EUR/USD resides in marginal positive territory after breaking back above its 200DMA at 1.3639.

COMMODITIES

Morgan Stanley says that a reversal in Indian gold policy will not spur demand. In a report Morgan Stanley said that official numbers will rise but lost demand has been partially met by unofficial imports so effective rise in imports will be lower on a net basis. (BBG) Following the elections in India the Modi led BJP party have begun to reverse the gold curbs put in place last year.

WTI and Brent both trade lower heading into the North American session as the risk premium erodes further from an uneventful election in the Ukraine where exit polls shows Poroshenko as the victor.