Equities’ slump deepens, oil gains momentum

Summary:

• Stocks slump accelerates as a EU migration deal seems to be hard to be hammered out within two weeks
• Swedish krona falls on risks stemming from EU membership referendum
• Oil gains a foothold as OPEC seeks a lower than initially though production increase

European stocks have deepened their declines, the Swedish krona has suffered from political risks while Brent oil prices have rebounded as OPEC was to discuss a smaller than thought output rise. As for 11:46 am BST the major European equities are suffering quite heavy losses with the German stock market taking the brunt of these declines being depressed by political unease stemming from a migration issue Angela Merkel faced over the weekend. She is likely to be handed a two-week deadline to hammer out a deal facilitating migrants to come back to countries in which they were first registered. In the meantime, Bouffier being a member of Merkel’s CDU said he does not expect that an EU migration deal will be doable within the upcoming two weeks.

Looking elsewhere it’s worth taking a closer attention to oil prices which were falling hard in the morning, but since then Brent prices have pared those losses. Relief came from Bloomberg headlines suggesting the cartel is likely to discuss a production rise between 300k and 600k, well below a value we have been offered earlier. It’s helped European grade prices being up 0.7% as of 11:52 am BST. In turn, on the currency front the Swedish krona has been affected by political anxiety after an opposition party known for its euro-skeptic views said it intends to call for a referendum on the country’s European Union membership after general elections taking place in September. The SEK is moving down 0.37% as of 11:53 am BST being by far the worst major currency in the G10 basket, ahead of the British pound. We’re going to provide more on this topic later today.

In line with expectations the US administration imposed new tariffs on goods imported from China worth $50 billion. It added that it’s ready to slap more levies once China retaliates, and it actually did so a couple of hours later. The Chinese State Council’s commission announced a 25% tariff on US goods (mainly agriculture products along with cars) worth approximately $34 billion coming into effect on 6 July. Moreover, China aims to impose tariffs on goods worth $50 billion, albeit an additional $16 billion package has to be undergone public review.

Over the course of the recent days major cryptocurrencies have settled down being steered by nothing. However, on Sunday the Bank of International Settlements, being regarded as a bank for central banks all around the world, issued a statement where it warned virtual currencies are not scalable and are more likely to suffer a breakdown in trust and efficiency along with the rising number of people using them. The bank noted that for any form of money to work across large networks it requires trust in the stability of its value and in its ability to scale efficiently.

General elections (parliamentary and presidential) in Turkey will take place on 24 June and it was called by President Recep Erdogan in late April as he looked to increase his grip on power. After elections the new president will lead the executive branch, and will be responsible for issuing presidential decrees during a state of emergency, hence its position will be significantly strengthened. The new framework will introduce vice presidency and dissolve the office of prime minister. It could bring substantial repercussions to financial stability in the country, therefore elections will be a pivotal event for the lira.

Shortly after returning from the G7 and Singapore meetings Donald Trump expressed his uncomfort with high oil prices. The OPEC cartel will have a possibility to address his concerns next week and surely this decision will have a paramount impact on prices of the commodity. The calendar will be filled with events such as the Bank of England meeting and PMI releases in Europe.