Risk aversion continues to dominate the global financial markets on Brexit fears. Nikkei suffers another day of selloff and is trading down -204 pts, or -1.28% at the time of writing. That followed -132.86 pts, or -0.74% fall in DJIA and -17.01 pts, or -0.81% fall in S&P 500. Sterling remains the weakest major currency this week and stays broadly soft in Asian session. Meanwhile, the Japanese yen is lifted by safe haven flow. In other markets, gold extended recent rally to as high as 1290.3 and is trading firm at 1285. Crude oil, however, stays soft and the near term pull back continues and is hovering around 48.4. The economic calendar is rather busy today with UK inflation and US retail sales being the major focuses. But traders mind will stay on the central bank meetings later in to the week and Brexit referendum next week.
Bond yields tumble globally on safe haven flows too. Benchmark German 10 year yield stayed near zero, close to record low. Japan and UK 10 year yield also dropped to record lows. US 10 year yield also extended recent fall to close down at 1.616%, hitting a four month low. Another factor that's pressuring US yield is the receding expectation of rate hike by Fed. It's clear that there is no chance for a Fed hike this week and markets are only pricing 2% chance. It should be noted that CME futures are pricing in just 18% chance of July hike, comparing over 50% chance pricing a month ago. The chance of September hike is 33%, close to half of 64% pricing a month ago.
On the data front, Australia NAB business confidence dropped to 3 in May. Inflation data will be a focus in European session. UK CPI is expected to rise to 0.4% yoy in May with core CPI up to 1.3% yoy. RPI and PPI will also be released in UK. Swiss PPI, Eurozone industrial production and employment will also be featured. From US, retail sales is expected to grow 0.3% in May with ex-auto sales up 0.4%. Import price index is expected to rise 0.8% mom in May while business inventories are expected to rise 0.2% in April.