Traders: Key events to watch this week; Ten-year Treasuries rallied 

Ten-year Treasuries rallied alongside core European bonds as the political crisis in Italy deepened, triggering risk-off trading across many global markets. Losses for the euro mounted and the region’s stocks sold off, while the dollar edged up.

The benchmark U.S. bond yield fell below 2.90 percent for the first time this month, while American equity futures retreated alongside the Stoxx Europe 600 Index. In Asia, the mood was also downbeat. The MSCI Asia Pacific Index dropped as shares of iPhone screen makers tumbled on a report that Apple Inc. is shifting to next-generation technology. The stronger yen left the Topix index of shares with a seventh straight session of declines, the longest losing streak since September 2016.

Political turmoil in Italy and — to a lesser extent — Spain have refreshed memories of the euro zone’s woes of the past decade. Pro- and anti-European forces are at loggerheads in Rome, with another election expected as early as September after parties failed to form a government in the wake of a poll in March.

“These developments are concerning,” Alessio de Longis, a New York-based portfolio manager at Oppenheimer Funds Inc., told Bloomberg Television in regard to Italy’s political landscape. “The market has taken a completely different tone, it no longer believes what the parties are saying. The markets will be really unable to move forward into a different narrative” until the Italian outlook is clearer, he indicated.

Elsewhere, the Turkish lira held most overnight gains after the central bank took steps to simplify its monetary policy. Many Southeast Asian markets were closed for holidays Tuesday, including Singapore, Indonesia, Malaysia and Thailand.

These are some key events to watch this week:

• EU trade chief Cecilia Malmstrom and U.S. Commerce Secretary Wilbur Ross are scheduled to meet Wednesday in an informal World Trade Organization ministerial in Paris.
• The U.S. employment report for May is due Friday. It’s the last before the June Fed meeting.
• Automakers report May U.S. sales the same day.
• Also Friday: China’s stock market joins MSCI Inc.’s global indexes.
• On Saturday U.S. Secretary of Commerce Wilbur Ross will travel to Beijing for more talks with Vice Premier Liu He on topics including ZTE Corp. and trade.

These are the main moves in markets:

Stocks

• The Stoxx Europe 600 Index decreased 0.6 percent as of 8:01 a.m. London time, the lowest in more than three weeks.
• Futures on the S&P 500 Index dipped 0.3 percent to the lowest in two weeks.
• The U.K.’s FTSE 100 Index fell 0.7 percent to the lowest in almost three weeks.
• Germany’s DAX Index fell 0.6 percent.
• The MSCI Emerging Market Index sank 0.7 percent to the lowest in more than five months.
• The MSCI Asia Pacific Index fell 0.4 percent to the lowest in almost three weeks on the biggest fall in two weeks.

Currencies

• The Bloomberg Dollar Spot Index increased 0.1 percent to the highest in more than five months.
• The euro decreased 0.3 percent to $1.1593, the weakest in almost seven months.
• The British pound fell 0.2 percent to $1.3285, the weakest in about six months.
• The Japanese yen jumped 0.5 percent to 108.92 per dollar, the strongest in five weeks.
• The Turkish lira declined 0.2 percent to 4.5914 per dollar.

Bonds

• The yield on 10-year Treasuries fell five basis points to 2.88 percent, reaching the lowest in almost six weeks on its sixth straight decline.
• Germany’s 10-year yield dipped four basis points to 0.30 percent, hitting the lowest in more than five months with its fifth straight decline.
• Britain’s 10-year yield fell six basis points to 1.321 percent, reaching the lowest in 20 weeks on its fifth straight decline.
• Italy’s 10-year yield climbed 19 basis points to 2.869 percent, the highest in almost four years.

Commodities

• West Texas Intermediate crude fell 1.8 percent to $66.69 a barrel, reaching the lowest in six weeks on its fifth consecutive decline.
• Gold dipped 0.1 percent to $1,296.78 an ounce.
• Brent crude gained 0.2 percent to $75.42 a barrel.

Source: Bloomberg – Treasuries Rally as Italy Woes Rock Global Assets: Markets Wrap

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