From Dave Lutz of Stifel, Nicolaus, here’s the super short-and-sweet version of what traders are talking about today.
Equity Futures are tracking much weaker, with SPX off 90bp – tracking losses overseas. Germany’s DAX is off almost 2%, as EU fins are weaker due to higher yields pressuring the PIIGs spreads. All eyes were on the Shanghai Composite hit for 5%+, it’s worse loss in 4 years – to end at the lowest point in nearly seven months – equity traders appeared spooked by the PBoC’s comments on Monday that liquidity was “reasonable” and this contributed to bloodletting in Chinese financial stocks – The shares of midsize Chinese banks, which were the most aggressive in risky financing behaviour that contributed to the current liquidity squeeze, suffered the heaviest selling. The Nikkei was hit for 1.2% as the Yen broke higher against the Dollar – Aussie was hit for 1.5% (China Spillover) – and those Asian Peripherals like Thailand, Philippines hit for over 2%.
Yields globally are breaking higher, with the US 10YY at 2.65%, Some moderate leaking of PIIGs debt (Focus on Italy Bond Auction this week) – There is $99bn of new Treasury debt spread across the two, five and seven-year sectors this week in what shapes as a test of investor appetite for government paper. With the Yen stronger and € weaker, the DXY is starting the week on mixed footing – but commodities, specifically Industrial Ones – are getting hit: Copper off almost 3%, Silver off 2% (UBS cuts price forecasts) and Gold off 1% (GS Cuts Prx Forecasts) – Interesting though that Crude Oil is mostly mixed – and the best performing commodity over the last week has been Iron Ore, gaining 6%.
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