Equity markets in the EU began the quarter with a price recovery from the previous drop but then fell again in May. Sovereign and corporate bond market volatility was also high, as signs of liquidity drying up appeared in May. Market risk is very high, resulting from high asset valuations in equities coupled with market uncertainty as the period of ultra-low interest rates draws to a close. Our outlook for liquidity, contagion and credit risk remains unchanged. Operational risk was elevated, with a negative outlook, as cyber threats and Brexit-related risks to business operations remain major concerns. Going forward, EU financial markets can be expected to become increasingly sensitive to mounting political and economic uncertainty from diverse sources, such as weakening economic fundamentals, transatlantic trade relations, emerging market capital flows, Brexit negotiations, and others. Assessing business exposures and ensuring adequate hedging against these risks will be a key concern for market participants in the coming months.