It’s been another rough day for stock markets around the world. With the NASDAQ and DAX posting 3% plus losses, it feels like the dykes of support have given way and enabled the bears to run wild in the streets. We're at the beginning of what has historically been the weakest time of year for stock markets which runs through mid-October and this year appears to be following a familiar pattern. A number of potential reasons have been tossed around over why the sudden rise in bearishness but in essence it all boils down to a cloudier outlook for corporate profits. In particular, the currency devaluations of the last week from China, Vietnam and Kazakhstan signal a weakening global economy and the potential for more turbulence as a currency war gets going. Greece calling another election didn’t help matters either Meanwhile, USD tumbled again today on more follow-through from yesterday’s FOMC minutes which were seen as dovish, reducing the chances of a September rate hike. This news, along with better than expected housing and Philly Fed data were unable to shore up support for US indices which saw the NASDAQ fall over 100 points and the Dow lose over 350 points. The failure of stocks to respond to dovish monetary news means that many traders have started to ask themselves: if after trillions of dollars of QE and years of Fed support, the US economy is still too fragile to be able to handle a measly quarter point rate hike, what’s going to happen if a crisis hits? To make matters worse, another wave of selling pressure hit North American markets in the last hour of trading indicating an unwillingness among exchange traders to hold positions overnight amid current uncertainty. This sends even more negative momentum into today’s Asia Pacific session that could make for another volatile day. Australia traders may want to note that Canadian stocks held up reasonably well as precious and base metal miners bounced as gold and copper rallied but the market was still unable to withstand the onslaught. The prime beneficiary of growing economic and financial contagion fears continues to be precious metals with gold and silver rising again as they reassert their roles as a store of value in times of trouble. Previously depressed European currencies have also been able to take advantage of the USD downdraft particularly EUR, NOK and SEK. Copper and crude oil also rebounded but this appears to be more related to a correction of oversold conditions and the weaker USD than a change in the demand outlook, so these bounces could be short lived. Energy stocks were down through the day indicating traders probably didn’t believe in the oil bounce. Today’s trading around the world could be influenced by Flash PMI reports which give traders their first view of how major economies have performed in August so far and if fears of a slowdown are well founded or not. These reports could spark significant action in Japanese and Chinese markets for a start. CAD has the potential to be active heading toward the weekend with Canadian retail sales and inflation numbers due Friday morning. Corporate News Hewlett Packard $0.88 vs street $0.85, guides next Q to $0.92-$0.98 below street $1.00 Economic News Significant announcements released overnight include: US jobless claims 277K vs street 270K US existing home sales 5.59M vs street 5.43M US Philadelphia Fed 8.3 vs street 6.8 US leading index (0.2%) vs street 0.2% US natural gas 53 BCF vs street 59 BCF Germany producer prices (1.3%) as expected Sweden unemployment rate 6.5% vs street 6.9% Norway Q2 GDP (0.1%) as expected Norway mainland Q2 GDP 0.2% as expected UK retail sales 4.2% vs street 4.4% UK retail ex auto and fuel 4.3% as expected Upcoming significant announcements include: 11:35 am AEST Japan flash manufacturing PMI previous 51.2 11:45 am AEST China flash manufacturing PMI street 48.2 8:00 am BST France flash manufacturing PMI street 49.7 8:00 am BST France flash service PMI street 52.0 8:30 am BST Germany flash manufacturing PMI street 51.6 8:30 am BST Germany flash service PMI street 53.7 9:00 am BST Eurozone flash manufacturing PMI street 52.2 9:00 am BST Eurozone flash service PMI street 54.0 8:30 am EDT Canada consumer prices street 1.3% 8:30 am EDT Canada core CPI street 2.4% 8:30 am EDT Canada retail sales street 0.2% 8:30 am EDT Canada retail ex auto street 0.5% 9:45 am EDT US flash manufacturing PMI street 53.8 1:00 pm EDT US Baker Hughes drill rig count previous 884 CMC Markets is an execution only service provider. 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Could flash PMI spark a bigger selloff or a rebound for stock markets?
20:00, 19 August 2015