JonesTrading’s Dave Lutz has what traders are talking about right now:
Good Morning! Feels like a continuation of yesterday’s growth concerns, tho not as severe. China’s PMI and “Beige Book” come in better, helping Aussie assets recover — While headlines on EU’s PMI showed further deterioration in Europe — driving Germany’s 10YY back under 1% for a spell. Right now Equity futures are weaker, led by a 40bp drop in the Russell as the Alibaba Hangover continues: Tencent dropped another 2% overnight — YHOO was off nearly 2% again, BABA traded as low as $US87.50 this AM. Overseas, the FTSE under sharp pressure, losing 1.3% as “Tax Inversion” targets are under pressure after Washington signaled moves to end the practice. Headlines earlier that Israel downed a Syrian aircraft in Israeli airspace have not been DAX friendly, with the German market off 1% in decent volume. Over in Asia – Emerging-market stocks slid to a 15-week low, led by South Korea as Samsung dropped to 2Y lows – Shanghai popped 80bp on headlines of relaxed mortgage rules and eco data – Japan was closed for Holiday — China PMI propelled the miners higher, helping Aussie close up 1%.
The US 10YY continues its retreat from the 200dma — losing 2bp this AM as safety and deflation demand grips sovereigns. – Yesterday, Treasuries made their peak into the EU credit close, so be watching for possible weaknesss this afternoon into the 2Y auction The Dollar is seeing some profit-taking from its recent strength against Yen and Euro. The falling Dollar, combined with some life out of China’s economy — is helping commodities early. Silver is bouncing 75bp off 4Y lows — while Syria is probably prompting Gold’s outperformance — the yellow metal up 1.2% early. Of note, it does feel like the growth commodities should be having more of a bounce to them — with Copper gaining only 30bp — while WTI and Brent are up less than 70bp after being shellacked of late. Headlines Ore below $US80/ton for the first time in 10+Y years, coupled with yesterday’s story about falling “breakeven” rates causing US producers to continue ramping, you may see any pop in energy commodity related stocks short-lived
Yesterday, it felt like hedging had an outsized impact on the market — the “Short Term” VIX (VXST) climbed 30%+ – but the October VIX contract had a much more muted move. Despite the downdraft we saw early from Russell — Growth names held in very well relative to value. With AGN/SLXP on the wires we should have tailwinds for Biotechs, but with the 3M5Y curve finally cooling off, Regional banks may continue to have headwinds. Rosh Hashanah rapidly approaching continue to expect a deterioration of equity volumes — so Chicagoland and Futures Hedging could have an outsized impact on the tape. We start off today with a handful of Fed speakers: Bullard (center) at 9, Powell (Dovish) at 9:20, and Fed’s George (Hawkish) at 9:30. We get Markit US Manufacturing PMI at 9:45, FHFA House Price Index and Richmond Fed at 10 — The week’s biggest POMO at 11 — a 2Y auction at 1, and Fed’s Kocherlakota (Dovish) speaks at 2. We do get API inventories tonight.