European Stocks Slide as Risk Aversion Returns to Peripherals

Stock market sell off continues in Europe. Market sentiment turned sour as falling oil prices sparked a fresh wave of risk aversion After losses on Wall Street Tuesday, stocks continued to head south in Asia. In Asia, it was the CSI 300 that outperformed and managed to close with a 1.17% gain, after MSCI finally decided to include 222 large Chinese companies in its 2018 Emerging Markets Index. Elsewhere though commodity producers dragged indices down as oil prices headed south amid supply concerns. The ASX lead the way down and closed with a loss of nearly 1.6%. The selloff continued in Europe and after hitting record highs Tuesday, the DAX is now down, while Eurozone peripherals fared even worse and the Euro Stoxx 50 lost nearly 1%. The FTSE 100 outperformed, after BoE’s Carney calmed rate hike fears Tuesday and underpinned by a weaker Pound. Oil prices managed to come back from a low of 42.75 yesterday, but at slightly over USD 43 per barrel remain under pressure as rising oil production in Libya and Nigeria cast fresh doubt on the efficacy of the OPEC oil agreement while a 26% drop in Chinese steel exports added to concerns about the global growth outlook.

Prime Minister May go without deal with DUP ahead of Queen’s speech. The Queen will read out the government’s legislative plans to lawmakers today. The program is reported to focus heavily on Brexit, while cutting out all controversial issues that cost her the majority in the election. But with talks with the DUP reportedly not going as expected, May can’t be certain that her plans will get the necessary support in the House of Commons and there are even reports of a deal with the Liberals, which have run the election on an anti-Brexit platform. Even within May’s own party, the vision of how a Brexit deal will look like are far from uniform with the Chancellor of the Exchequer arguing for a focus on the economic impact, rather than May’s focus on immigration, with the former leaving the door open for the U.K. to remain in the single market, which would require acceptance of the freedom of movement.

BoJ Minutes Show Easing Bias in Place

The Bank of Japan minutes for the April 26-27 meeting showed that policymakers are not concerned if government deb purchases fall below the guidance when performing their open market operations. The Bank of Japan Governor Haruhiko Kuroda said maintaining the current easy monetary conditions is appropriate because prices are lagging improvements in the economy and remain distant from the central bank’s inflation target. Kuroda, in a speech on Wednesday, reiterated the BOJ’s growing optimism on the economic outlook due to rising exports, higher factory output, and a tightening labor market.