Amid chaos in global markets, here’s what you need to know before the open on Monday.
Today was China’s ‘Black Monday.’ The Shanghai Composite crashed 8.5% and is now trading in negative territory for the year. Monday’s collapse follows a loss of more than 10% last week and has China’s stock market down 38% since the June 12 high. Business Insider Australia reports the drop was the largest one-day percentage decline for Chinese stocks since February 27, 2007 and the sixth largest on record since the 10% daily limit was implemented in December 1996.
Beijing said its pension fund can increase its stock allocation. China’s giant pension fund will be allowed to up its stock allocation to 30% of its holdings, to about 1.05 trillion yuan ($US164.345 billion), according to the South China Morning Post. The move is the latest measure taken by Chinese authorities to contain the free fall in mainland stocks.
Markets around the world are lower. Asian markets saw significant selling pressure. Aside from the plunge in China, Hong Kong’s Hang Seng and India’s Sensex both tumbled 5.2% while Japan’s Nikkei lost 4.6% and Australia’s ASX shed 4.1%. In Europe, the damage has been somewhat contained. Markets around the region are all down about 2.8%.
Commodities are at their lowest level since 1999. The Bloomberg Commodity Index is trading at 16-year lows. Energy is the biggest drag as Brent crude oil trades down 3.8% at $US43.73 per barrel while West Texas Intermediate crude oil is lower by 3.7% at $US38.93 per barrel and on track for its first sub-$US40 close since 2009. Metals aren’t faring much better with silver off 2.9% at $US14.90 per ounce and copper weaker by 2.4% at $US2.2490 per ounce. Gold is outperforming, down 0.5% at $US1154.00 per ounce.
The US dollar trades mixed. The euro is up 1% against the dollar and threatening the 1.1500 level, its best in six and a half months. Elsewhere, a loss of 1.2% has USDJPY (dollar/yen) looking at its first sub-120.00 print since in three months. However, the dollar is stronger against emerging market currencies. A 1.5% gain has USDRUB at 70.65, a seven-month low for Russia’s ruble. Also of note, USDZAR (dollar/South Africa rand) spiked to an all-time high of 14.0682 in overnight trade and is now up 2.2% near 13.25.
Bonds are rallying. The US 10-year yield is flirting with its first sub-2.00% close since April. The benchmark yield touched an overnight low of 1.97% before rallying back to the unchanged line at 2.04%. Currently, the 10-year is down 4 basis points at 2.00%.
Netflix and Softbank announced a streaming partnership in Japan. The Wall Street Journal reports Netflix and Softbank will begin a streaming service in Japan on September 2. The agreement allows Softbank subscribers to sign up for Netflix packages costing from ¥650 ($US5.4) to ¥1,450 a month.
Conagra Foods is nearing a deal to sell its private label business. Treehouse Foods is in talks to buy Conagra’s private label business for about $US3 billion, according to the New York Post. A source with knowledge of the talks told the New York Post, “[Reed (Conagra’s CEO)] left little doubt they are involved and want to do the deal.”
Economic data is absent from the calendar. Tuesday’s data includes Case-Shiller 20-city Index, FHFA Housing Price Index, new home sales, and consumer confidence.
Earnings flow is extremely light. Tuniu is the lone company confirmed to report ahead of the opening bell. Premier and Qunar release their quarterly results after markets close. Tomorrow’s schedule returns to a more normal flow.
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