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Morning Brief

Opening calls are indicating a lower open this morning in Europe, as investors are wary of the situation in Spain and Greece. The markets are not confident that Spain will be able to bailout its banks without international help. Spanish banks need capitalisation in view of the non-performing loans on their balance sheet due to a recession in the country. The yield spread between German yields and Spanish Yields has now widened significantly.

In Greece, the saga continues and parties now are campaigning for the 17th June Election. Although polls indicate a pro bailout party victory, polls are too close to be able to determine a decisive winner.

Yesterday, German two year yield and US treasury yield were pushed down to record levels as investors are willing to forego their return and search for safe assets to park their money.

The US markets tumbled yesterday on Europe worries. It was also interesting to see companies which are economically sensitive such as Caterpillar being hit in the session on pessimistic outlook. Oil is trading lower on economic pessimistic outlook.