European Markets React to Weak Business Activity Data
European markets are currently processing weaker-than-expected business activity data. The latest PMI (Purchasing Managers' Index) readings for Europe’s two largest economies fell short of forecasts, prompting a surge in bond prices as traders speculate on potential monetary easing. Germany’s benchmark 10-year bond yield dropped by six basis points, influencing a decrease in US Treasury yields and a rise in UK gilts following similar weak growth data from private sector companies.
US Markets Brace for Triple Witching Expiration
In the US, futures are slightly lower, particularly in the tech sector, which is showing signs of a slowdown after an intense AI-fueled rally. Bank of America reports that tech funds saw their largest weekly inflow ever, which may indicate a peak in AI investment enthusiasm or “AI capitulation.”
Today marks the triple witching expiration day, a significant event in the financial markets when contracts for equities, index options, and futures all mature simultaneously. This event forces traders to either roll over their existing positions or initiate new ones, leading to heightened market activity. An estimated $5.5 trillion worth of options tied to indexes, stocks, and exchange-traded funds are set to expire, according to SpotGamma.
Canada Prepares Tariffs on Chinese EVs
Meanwhile, in Canada, the government is preparing to impose new tariffs on Chinese electric vehicles (EVs). This move comes as part of broader trade tensions and could have significant implications for the global EV market and supply chains.
European Stocks and Currency Movements
The Stoxx 600 index extended its declines as European bond yields adjusted to the latest economic data. The euro weakened, reaching its lowest point in a week, following French President Emmanuel Macron’s unexpected decision to call for a snap election, adding political uncertainty to the economic mix.
Upcoming US Economic Data and Market Events
Following Europe’s lead, the US is set to release its preliminary PMI data for June today. Analysts expect this data to indicate slightly weaker private sector business activity, although the figures are still expected to reflect growth. Additionally, the latest data on US existing home sales will be published, providing further insights into the housing market's current state.
Federal Reserve official Thomas Barkin is also scheduled to speak today, and his remarks will be closely watched for any hints regarding future monetary policy actions.
Summary
Today's market activities are shaped by a combination of weaker-than-expected European business data, the significant triple witching expiration in the US, and geopolitical trade developments from Canada. Investors will be paying close attention to the upcoming US economic data and Federal Reserve comments to gauge the future direction of the markets. Stay tuned for more updates and insights as the day progresses.