Euro Zone under pressure

 After a contraction of -0.1% in Q1, Italy reported unexpectedly a 0.2% contraction (first estimates) in the second quarter (vs. consensus of +0.2%). The 10-year yield is now trading at 2.78%, 10bps higher than last week’s low of

It seems that the European Recovery is already over…

Eurostoxx under pressure
Watch the second lower trend line on Eurostoxx 50 as European banks will remain under pressure in the weeks ahead with investors still fearing further write-offs. As you can see it on the chart below, the next support on the downside stands at 3,000, which could lead to a further correction if it breaks it.

ES50

(Source: Reuters)

As you know, European banks are still in the middle of an AQR – Asset quality review – with the results to be unveiled in late October, slightly before the ECB takes over as the EZ official banking regulator on November 4. Some of the people refer the AQR as a form of stress test, and the question investors are asking themselves is if this ‘stress test’ will be effective.

 However, remember smth: back in 2011, a similar exercise was done by EBA (European Banking Authority). Dexia passed the test and then had to be bailed out three months later…

EURUSD remains also under pressure and is now trading slightly below the 50% Fibo retracement (1.2750 – 1.4000). Next support on the downside stands at 1.3300.

EURUSD

(Source: Reuters)

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