The strong USD and Greek debt concerns drag global equities lower

Tuesday, May 26, 2015

European equity markets fluctuated strongly and posted renewed losses in today’s trading session as investors remained cautious due to disappointing US economic data and ongoing concerns over the looming financial crisis in Greece. The CAC, DAX, IBEX and London equity benchmark indices declined between 0.8% and 1.7%. The euro extended losses for third consecutive session and retreated towards 1.0850 against the USD.

EURUSD Spot

EUR Curncy (Euro Spot )  Daily 26 2015-05-26 16-21-00

In the US, tepid economic data weighed on market sentiment and limited risk appetite. The Dow Jones index fell sharply over 200 points (-1.2%) towards 18,000, while the S&P 500 and NASDAQ indices retreated 1.1% and 1.3%, respectively, at the time of writing.

US durable goods fell 0.5% m/m in April in line with analysts’ expectations, while the FHFA house price index rose modestly 0.3% in March missing analysts’ estimates of a 0.7% rise. In addition, the Markit Composite PMI was reported down to 56.1 in May compared to 57.0 in April while Markit Services PMI dropped lower to 56.4 in May from 57.4 in April. The only positive reading from the Consumer Confidence Index which increased to 94.4 in April compared to 95.2 in March. However, the USD index continued its strong uptrend and rose above 97.20 against a basket of currencies, as the euro and the yen mainly remain weak.

In London, banks and energy stocks dragged the index lower. RBS and Barclays retreated 2.9% and 2.2%, respectively, while Lloyds, Standard Chartered and HSBC also posted losses between 0.5% and 1.3%.

Crude oil prices remained under pressure as the strong USD weighed on market sentiment in the oil market. Both Brent and WTI front month futures plunged over 2.5% in today’s session with WTI futures trading around $58 per barrel. Royal Dutch Shell, BP and BG Group retreated sharply between 1.5% and 2.5%.  

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