The Nikkei and other major Asian indices struggled early on Monday and produced steep losses across the board. The JPY also continues to trade on the stronger side of its range as it continues find takers, even in the wake of last week’s Bank of Japan’s monetary policy decision. The selloff of equities mirrors the losses that took place on Wall Street as investors in the U.S. weren’t able to sustain positive momentum on Friday.
The global markets appear nervous and from Europe, the topic of Deutsche Bank (DE:DBKGn) is not helping circumstances. The giant German bank has been slumping this morning and finds itself near record lows. Other banks in Europe are also under pressure.
Recent comments by Angela Merkel have certainly not helped the bank and although her government may not want any part of it, at some juncture the German bank could find itself under the onerous banner of ‘Too Big To Fail”.
Housing sector data from the U.S. will be published today, but it will not receive much attention. Mario Draghi will be speaking on behalf of the ECB in Brussels today and talking about European economic conditions. It will be of interest to see if the ECB President is asked to comment on the current problems of Deutsche Bank.
Also stirring the pot today will be ongoing meetings from OPEC that are being conducted in Algeria in an effort to reduce production, in order to help ease over supply. An optimistic finish to the OPEC meetings are not being counted on by investors and the price of crude oil continues to be under pressure.
Tomorrow the CB Consumer Confidence reading will come from the States. The report will be watched closely, but the data will likely take a back seat to the negative sentiment that seems to be building like a wave in the marketplace. If stock markets continue to tumble this afternoon in Europe and finish off the day with losses in the States, what will be important to look at will be the level of volatility.
The banking sector in Europe has lurked with problems for years, and if the Deutsche Bank woes suddenly cascade and its equity value continues to slump, larger problems will ensue in the broad markets.
In the wake of the surge in nervous trading on the major stock Indices, the EUR has actually traded in a fairly tight range as of this morning against the USD, while the GBP has taken plenty of heat and continued to be sold off against the greenback. Divergent trading seems to be rising and traders will need to use risk management wisely this week.
There seem to be many potential landmines ahead including a presidential debate between Trump and Clinton this evening, the ongoing OPEC meetings, Deutsche Bank concerns, and important data from the States that will come via the GDP report later this week.