Your morning market update includes some fearmongering about a Chinese slowdown.
– Big news of course was the sharp reversal in the Aussie dollar yesterday, which happened at the same time as the Nikkei sold off, USDJPY fell heavily and Shanghai stocks markets went south. The catalyst was a short spike in Chinese interest rates as the Central Bank failed to inject cash for the second day in a row and the news that Chinese banks were starting to increase writeoffs for property.
– It seems like more of a storm in a tea cup than the start of a Chinese slowdown or a collapse in the Chinese banking system. Indeed some argue, and I agree, that if Chinese banks are now in a position to really write down dodgy assets, then the banking system is in good shape to weather the storm.
– It’s a theory that gains some traction when you look at the much milder sell-offs in the US and European markets. The Dow closed down 55 points or 0.35%, the Nasdaq was 0.57% lower and the S&P fell 9 points or 0.49% to 1746.
– In Europe, the FTSE also resisted the Asian carnage, falling just 0.32%. The DAX fell 0.31%, CAC dropped 0.8% and Spain fell 1.85% even though the Central Bank reported it dragged itself out of recession with 0.1% growth. In Italy, Silvio Berlusconi has been charged with bribery of a senator which led to the fall of a previous Prodi Government. That was then followed by elections which Berlusconi won. This could be the one that gets him and stocks in Milan fell 1.85% as a result.
– On the Sydney Futures Exchange, there was a small rise of 4 points in the December contract to 5348 bid. On the bond markets the 3’s fell 2 points and 10’s fell 3.5 points, even though rates fell a little offshore. US 10’s closed down 1 at 2.5%, Bunds were 3 points lower and Gilts fell 4 basis points after the BoE MPC meeting to 2.44%.
– On Forex markets, amongst the majors it was the Aussie (0.9624, -0.86% and 130 points of the 0.9755 high) and the yen (USDJPY, 97.31 -0.83%) that were the big movers, with the euro (1.3780) largely unchanged and sterling (1.6170) down a little. Elsewhere, USDCAD rose 0.96% to 1.0383 after the BoC removed the reference to higher rates in its communique after its monthly meeting.
– On Commodities, Nymex crude was lower again down 1.29% to $97.03 Bbl, Gold fell $8.60 to $1331 oz and Silver fell back to $22.55. The big mover was Copper, which dropped 6 cents a pound to $3.26 for a fall of almost 2%. On the Ags, Corn was 0.91% lower, Wheat rose 0.14% and Soybeans were 0.56%.
On the data front, New Zealand releases trade data, we get details of foreign investment in Japan and very importantly, in context of yesterday’s Asian moves, the preliminary estimate of the HSBC manufacturing PMI. Also, the RBA deputy governor on investment in the Australian economy, which will be interesting.
Tonight we get a raft of preliminary Markit PMI’s for Europe, jobless claims and new home sales in the US and BoE Governor Carney speaks around 4am EDT.