Risk attitudes mixed, with referendum fears dominating

Referendums in Catalonia and Iraqi Kurdistan are driving strong moves in the euro and oil, while the North Korean standoff remains a key worry for market sentiment

• European markets lower as risk attitudes remain mixed

• Euro falls amid German and Catalan fears

• Referendum in Kurdistan drives Brent to two-year high

European markets are starting yet another day in the red today, as the risk-off sentiment driven by the continued war of words between the US and North Korea continues to dominate. Despite Donald Trump’s inflammatory comments, it is clear that not everyone shares his approach, with Secretary of Defence James Mattis citing the desire to solve the issue diplomatically. However, it feels as though markets are in a state of flux, with uncertainty over a return to either full risk-on or risk-off.

The euro has been hit hard at the start of the week, with yesterday’s German election driven downside being extended today, and EURUSD hitting a month low in early trade. The impending Catalonian referendum is certainly a fear for many within the EU, with the result providing the potential for ongoing conflict in the region. Referendums are clearly a major market driver at the moment, with the Iraqi Kurdistan vote being a potential disruption to the region’s oil supply. As President Erdogan threatens to cut off the Kurdistan oil pipelines, it comes as no surprise that we have seen another leg higher for Brent, which hit a two-year high yesterday.

Ahead of the open we expect the Dow Jones to open 13 points higher, at 22,313.