Markets stabilized from yesterday's sharp risk selloff. While Asian equities were generally lower following US stocks, European indices opened the day flat. Yen crosses also recovered after yesterday's spike low. Dollar is under mild pressure against European majors but overall it's stuck in familiar range. The financial markets could turn into consolidative mode before the week closes. Nonetheless, employment data from Canada will be closely watched and strong numbers today could trigger another round of rally in the Loonie.
Peripheral European bonds weakened yesterday after Espirito Santo Financial Group, which holds a 25% stake in Banco Espirito Santo (LISBON:BES) and is the bank's largest shareholder, requested to suspend its shares due to "material difficulties" at its own largest shareholder. The BES noted that it is "waiting for the release of the restructuring plan of Espírito Santo Group in order to assess the potential losses related to its exposure". BES's shares plummeted -17% yesterday before trading was stopped. Being the largest listed bank of Portugal, the selloff dragged Portuguese PSI all-share index -3% lower.
ECB governing council member Nowotny said there is no need for "further action in the near future" regarding monetary policy, as there is no imminent risk of deflation. He noted that the ECB already saw "some positive results" fro its stimulus programs, including "a certain easing of financing conditions on the European level and also to the tendency of being able to have stopped the appreciation of the euro."
On the data front, Australia home loan was flat in May. German CPI was finalized at 0.3% mom, 1.0% yoy in June. Canada employment is expected to show 24k growth in June and unemployment is expected to be unchanged at 7.0%.