Via Dave Lutz at JonesTrading, here’s a super quick guide to what traders are talking about before markets open.
Morning! Sea o’ green early this “Turnaround Tuesday”, despite Shanghai falling 7.6%, with more than 2,000 companies listed across China’s two exchanges dropping the 10% limit down as heavily-weighted blue-chips collapsed on headlines the PBOC is through trying to control the fall. That said, we’ve taken a leg higher as China’s central bank cuts benchmark interest rates, lowers banks’ reserve requirement ratio by 50bp (Street was lookin for 100bp) – but continue to fail those 2 resistance points I mentioned y’day in chats —> E-Mins 1950 / NQ 4200. Europe’s main indices getting close to reversing all their losses in yesterday’s bloodbath, with every sector in the DAX and Stoxx higher in very good volume — Led by a 4%+ surge in Fins, Energy, Staples and Tech. FTSE is up 3.5% as Miners in sharp rally mode as BHP holds divvy. Over in Asia, Nikkei bore the brunt of China sympathy selling, with the Nikkei -4% lower on Yen strength — but Aussie and “Emerging Asia” nations like India, Thailand, Malaysia, Indonesia all traded higher as commodities stabilised and investors gauged the FOMC’s reaction to the last 24hours.
There is sharp selling in the Treasury market, pressing the 10Y and 30YY up 7bp early, and well above yesterday’s highs. Fed Funds right now have moved back to a 28% chance of a September Lift, up from 22% yesterday AM but down from a coin-flip last week. That “Policy Sensitive” 2YY is climbing back from 2month lows as we eyeball FedSpeak into JaxHole. German’s are selling protection sharply, with their 10YY up 10bp as Germany’s IFO comes in better — and both the Yen and Euro are weaker as haven covering subsides and investors start re-embracing leverage. The weaker $US is a tailwind for commodities, and we are seeing Copper and Silver retrace about 50% of yesterday’s losses, while the forced de-leveraging in crude has subsided, helping Brent and WTI bounce 3% into Inventory data tonight — Street looking for a build of 2MM. The Gold complex remains under pressure, losing 50bp after not showing much life during yesterday’s antics.
We do have an active slate of catalysts scheduled today, with FHFA House Price Index and S&P Case-Shiller at 9am, Markit US Composite PMI at 9:45 — ahead of New Home Sales, Consumer Confidence Richmond Fed, and CBO’s “Update to the Budget and Economic Outlook” at 10am. At 1pm today, the US Treasury will auction $US26B in 2Y Notes — and after the bell we get that API inventory data for Crude at 4:30. Down 30miles West of here, President Obama returns from fund-raising in Las Vegas — and the Senate, House remain on summer break.
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