Citi curbs "euro enthusiasm" on China growth lag
- U.S. indexes modestly lower
- Energy leads sector gains, materials weakest
- Euro STOXX 600 index down ~0.5%
- Dollar up; crude, bitcoin both up >1%; gold flat
- U.S. 10-Year Treasury yield rises to ~3.74%
CITI CURBS "EURO ENTHUSIASM" ON CHINA GROWTH LAG (0930 EDT/1330 GMT)
A lag in China’s industrial cycle is depriving the euro from additional external demand-related tailwinds, according to CitiFX strategists, who have curbed their "euro enthusiasm" as a result.
Vasileios Gkionakis, EMEA Head of CitiFX G10 Strategy at Citi Markets, now expects EURUSD to trade in a range of 1.07-1.12, having previously argued for EURUSD rising closer to 1.15 last November. The currency was last at 1.078 
EURUSD.
In a note, Gkionakis said his team still considers the ECB underpriced and sees further euro zone terms-of-trade improvement due to natural gas price declines.
But that is not enough to offset China growth concerns.
"The April economic data coming out of China has disappointed many, us included, particularly when it comes to trade activity, with imports in April contracting by 7.9% YoY," writes Gkionakis.
In turn, this has increased the risk that euro zone exports to China will either stall or rise at a very slow pace, he adds.
There is one scenario that could see their enthusiasm return.
That is if the "US-RoW (rest of the world) growth expectations differential resumes declining, potentially due to China firing up stimulus," which Gkionakis says would be outright supportive of the currency converging towards 1.15.
(Lucy Raitano)
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STREAKING U.S. 10-YEAR TREASURY YIELD HITS MORE THAN 2-MONTH HIGH (0900 EDT/1300 GMT)
President Joe Biden and House Speaker Kevin McCarthy could not reach an agreement on Monday on how to lift the $31.4 trillion debt ceiling ahead of the June 1 deadline, but vowed to keep talking.
Meanwhile, on Monday, the U.S. 10-year Treasury yield US10Y ended higher for a seventh-straight day. The yield last rose seven days in a row in early April of last year. The yield last rose more than seven-straight days when it posted a nine-day win streak in mid-September 2017.
On Tuesday, the yield has hit 3.7610%, or its highest level since March 13 of this year:
Given the streak, the yield's rise appears stretched shorter-term. That said, traders are eyeing the resistance line from the October 2022 high, which now comes in around 3.92%, as the next significant hurdle. The 23.6% Fibonacci retracement of the 1981-2020 yield decline is at 3.9765%.
Initial support is at 3.67%, but the yield may now need to reverse back below the 3.62%-3.58% area, which includes the 100- and 200-day moving averages, to suggest a return of greater downside pressure.
(Terence Gabriel)
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