Via Dave Lutz at JonesTrading, here’s a super quick to what traders are talking about before markets open in rainy New York City.
Good Morning! US Futures are under pressure as China fires the latest salvo in the “Currency Wars” — China’s central bank overnight devalued its currency by nearly 2% against the US dollar, sparking the biggest one-day loss in two decades. Although this move seemed expected, the ripples emulating from Asia weigh heavy in Euroland. The DAX is getting whacked for 1.6%, as Euro automakers Daimler, Porsche, BMW, Renault — as well as Luxury names like LVMH, Hermes, Richemont, Dior and Swatch are all under sharp pressure on the China devaluation. Interesting enough volumes are quite muted across the continent despite moves in some of these large-cap conglomerates — smells all futures driven. Athens is the only Euro market higher as Greece secures agreement on the new bail-out. Over in Asia, Shanghai closed flat, but the FX moves weigh on several Asian exporters — Singapore lost 1.4%, Nikkei lost 40bp, South Korea was hit for almost 1%, while ‘Emerging Asia” countries like Indonesia and Malaysia for over 1%
China’s impact was most pronounced in the FX of their main trading partners — Taiwan, Singapore, Aussie, South Korean currencies all hit; Malaysian ringgit now the weakest since the Asian financial crisis of 1998, and the Indonesian rupiah is hitting a 17Y low today. It’s very interesting that the Euro is well bid again, especially as German ZEW comes in weak. The DXY is higher, and coupled with China has many Industrial commodities under pressure. Copper is off 2.3% and approaching 6Y lows — hitting the global mining stocks, but interesting that Platinum is up 1% despite bad Chinese Auto numbers overnight. The Oil complex is giving back roughly half of yesterday’s gains as headlines hit saying “OPEC output hitting 3Y high as Iran pumps most since 2012”. In softs – Corn is giving back half of yesterday’s satellite image induced gains, while Soy and Wheat both retreat 1%.
We have some scheduled catalysts on the slate today, starting with Canadian Housing Starts at 8:15 (bubble and oil read), US Nonfarm Productivity and Unit Labour Costs at 8:30, followed by US Wholesale Inventories at 10. Brazil is supposed to have a Inflation Linked Bond Auction at 11 — while the USA auctions off $US24B in 3Ys at 1pm. The Energy complex will be focused on DOE short-term energy outlook at high noon, ahead of API data for Crude after the close. Senate, House on August recess — and President Obama on vacation in Martha’s Vineyard.