CROSS ASSET: Equity Selloff And Global Demand Worry Supports FI, Curves Steepen

The risk-off moves in equity futures have supported core FI this morning, with Bund, UST and Gilt futures all reaching intraday highs. 

• European and UK earnings have been weak across the board, with Eurostoxx 50 futures having traded through key support at 4,848/46.
• The Eurostoxx Autos&parts subindex has traded particularly poor as the confluence of global growth concerns and 12% drop in Stellantis shares post-earnings weighs heavily. The subindex has now erased the entirety of the early '24 rally, which reached 20% in early April.
• Further JPY short-covering has contributed to the global risk-off, as carry trades are unwound.
• French manufacturing sentiment was weaker than expected, ahead of the more closely watched IFO release at 0900BST.
• Cash curves have steepened further, as increased rate cut expectations drags the short-end lower.
• Continued worries surrounding Chinese demand/global growth (underscored by the 20bp MLF cut overnight) will be also factoring in.
• In the same vein, commodities (oil futures, industrial metals) have also softened on the day, supporting bonds.