Via Dave Lutz at JonesTrading, here’s a super quick guide to what traders are talking about before markets open on Tuesday.
Good Morning! So far, not showing signs of a “Turnaround Tuesday” as US futures have just dropped to break yesterday’s lows. The S&P is off 65bp as sell tickets abound overseas. Miners and Oil majors been fighting it out for the floor in Europe as Chinese Trade data showed sluggish demand — hitting China’s major trading partner Germany for 1.1% as discretionary shares drop. Resource Heavy FTSE is getting whacked as well. With Anglo and Glencore off 8%+, BHP, Rio and Antofagasta 5%+. It was a sea of red in Asia – Shanghai hit for 1.89% and Hong Kong dropped 1.34% as China Trade and Smog scared buyers. While Japan’s economy grew more than expected — the ensuing pop in Yen weighs on their exporters, hitting Nikkei for 90bp. Aussie was hit for just under 1% as miners and energy stocks weighed thanks to headers from Anglo, South 32 and Rio, while most Emerging Markets across Asia were hit for a like amount.
The US 10YY is up slightly, rebounding from yesterday’s sharp buying due to over-short positioning. A continued rebound may fuel Equity buying, so bulls will be looking to see if US paper can retrace back over 2.25%. Fed Funds remains at a 78% chance of Fed liftoff, but some covering in Euros, coupled with that Japanese GDP print, is pressuring the $ lower despite continued gains against commodity-linked currencies which sees the C$ on a 11Y low. The weaker $ is a welcome tailwind for commodities, but Crude Oil showing a very “dead cat” bounce just off 7Y lows into US inventory data later, while the bulk of the metals are dropping, led by 75bp+ falls in Silver and Nickel. Softs are mostly red, with Cocoa and Coffee hit for 1.75%+ as investors book recent gains.
A very light day of scheduled catalysts in the USA, with only JOLTS Job Openings at 10 and a $24B, 3Y Note auction at 1 hitting before the API Crude Inventory data prints at 4:30. Down in Washington, at 10am the House Financial Services Cmte holds hearing on oversight of FSOC, right when House Speaker Paul Ryan and Republican leaders hold a press event after GOP conference meeting — most likely surrounding the Budget negotiations, which seem to have stalled with both sides anticipating a extension before Friday’s deadline. At 2pm Transportation Sec. Anthony Foxx holds news conference to announce plans for enhancements to DOT’s New Car Assessment Program that provides safety ratings for consumers. We have no more FOMC speakers as the Fed Blackout Window opens.