Via Dave Lutz at JonesTrading, here’s what traders are talking about before markets open in New York.
Good morning! Global Equity benchmarks are under pressure, thanks to renewed China concerns and less visibility on the September liftoff. The DAX is off 1.2%, dragging the US Benchmarks ~70bp lower thru technical support (SPY 200dma / QQQ 50dma). Financials and Consumer Discretionary are the biggest weights over in Frankfurt, and we are seeing very heavy volume with all major bourses 25%+ more turnover than normal. Luxury goods remain under pressure Swiss Watch makers clubbed as exports to Asia collapse the most in 6years – causing renewed fretting about waning demand from China. Over in Asia, Shanghai lost 3.4% overnight — it’s now nearly 30% below its peak 2mos ago, and chatter has the PBOC bid down near 3500 (FT). Hong Kong shed 1.8%, slipping into bear market territory – Nikkei lost 90bp and Australia fell 1.7% as miners and banks were hit — South Korea was off 1.2% as they exchange fire with the north, while all of the Emerging markets were hit sharply (except Taiwan).
Thanks to the combo of increasing Chinese concerns and a dovish tone to yesterday’s Fed minutes – “haven” government bonds are in sharp demand, with the US 10YY breaking sharply towards a test of summer lows near 2.05%, but the bond market hasn’t gotten more dovish overnight, with the Fed Funds and 2YY moving slightly higher overnight. Euro is in full honeybadger — as declining leverage cause shorts to cover — While all of those EM Currencies had a very bad overnight — Kazakhstan allowed the tenge to float freely, sparking a 20% plunge; South African Rand falls to lowest since Dec 2001, and Turkish lira tumbles to fresh low. With the DXY off sharply, the tailwind is most noticeable in Metals, where Silver is up 1.5%, Copper 1.2% and Gold moving nearly 1% higher and back thru the 50dma. The tide is retreating in Energy tho — With Brent off 1.2% and WTI’s spot (which expires today) nearing a $US40 test.
We get Weekly Jobless Claims at 8:30 — then a slew of headers with Freddie Mac mortgage rates, Existing Home Sales, Philadelphia Fed Business Outlook and Leading Index all at 10am – Natty gas Inventory data at 10:30, and at 1pm the US Treasury is auctioning off $US16B in 5Y TIPS. At 8:20 tonight, Fed’s Kocherlakota speaks in Seoul. Song remains the same in DC – President Obama on vacation in Martha’s Vineyard and the Senate, House on August recess. At 10am, Former President Jimmy Carter will be discussing his cancer diagnosis.