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Market sentiment is starting to sour in European morning trade after French and German PMI readings present a reminder that central banks are on the verge of raising rates in a recession. The relative uncertainty and unease is causing a more risk averse mood now that stocks are tumbling and bonds are more in demand.

European indices are down more than 1% on the day, with S&P 500 futures falling to fresh lows, down 0.7%, currently. German 10-year Bund yields are also down 11 basis points to 1.51%:

Given that the markets have already been jittery over the past few sessions, negating the optimism of the start of the week. I think we could see a heavier risk sell in the coming sessions with little else to change the narrative.

The Euro takes a big hit with EUR/JPY falling over 100 pips following the data release:

Risk takes a hit on the head after dismal French and German PMI readings

The dollar and yen are more in demand across the board, with the latter leading the charge in trading today after retracing some of its losses from earlier in the week. EUR/USD is now down to 1.0500 while GBP/USD has plunged rapidly from 1.2235 to 1.2175, approaching minor support around 1.2160-70 for now.

Elsewhere, AUD/USD is also dragged to session lows and is down 0.8% at 0.6870. This is its lowest level in a week with the June 14th low at 0.6850, a key support level to watch.

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