October 19, 2018

European Markets Sink On Italian Fears, China Surges After GDP Miss; S&P Futs Flat

After another turbulent week for markets, which saw violent reversals in US stocks which soared on Tuesday on the back of the biggest short squeeze since the Trump election only to tumble on Thursday on a combination of fears about the hawkish Fed, Chinese margin calls, the Italian standoff with the EU, and concerns about slowing profits, Friday has so far been a relatively quiet session with US equity futures fading the initial move higher and trading close to unchanged.

Markets in Europe were far more downbeat, with the Stoxx 600 falling as much as 0.6% around 6am ET, retreating for a third session in a row...

... with the auto sector down 2.8%, while renewed concerns about Rome's showdown with Brussels over the 2019 budget sent Italy's FTSE MIB to a 19-month low, down 1.6%, and Italian bond yields to new multi year highs as EU nations warned Italy’s populist government its budget won’t fly, with signs of contagion apparent as yields on Spain’s 10-year bonds climb to the highest level since October 2017.

The European auto sector was the biggest loser as the stoxx autos & parts index tumbled after Michelin issued a warning of declining 2H sales in Europe and China,

The latest weekly flow data showed that European equity funds suffered outflows of $4.8b in week ending Oct. 17, the biggest redemption in 27 weeks, and bringing the year-to-date outflows now at $50.4bn.

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