Market wrap: risk aversion increasing, watching sterling - Westpac

Analysts at Westpac offered a market wrap.

Key Quotes:

"Global market sentiment:

A degree of risk aversion increased in relatively light European trading (given the US Martin Luther King holiday) saw stocks either side of 1% lower in further reactions to weekend comments from Trump and UK’s Hammond and May and the responses from China and EU. Data releases were extremely light and IMF growth updates, which were generally positive, garnered little reaction.

Interest rates:

US markets were closed and European bonds were generally lower, especially so in UK where 10yr Gilts drifted down to 1.31% (-5bps). Italian BTP’s widened to Bunds (2.5bps) in a muted response to the weekend DBRS downgrade.

Currencies:

GBP weakness was the key event into European trading and although lows were posted early in the European day, GBP rebounds were very contained as market’s await Theresa May’s speech tomorrow in which she is expected to provide some outline of the Government’s Brexit strategy. Although USD did slip later in the trading day, other currencies were treading water."