China selling rules, Eurozone deflation fears keep traders hopping
There has been mixed action around world markets as traders try to make sense out of the China selloff and other news.
Chinese markets didn’t see much follow through selling overnight and actually stabilized with Shanghai posting a small 0.3% loss and the Hang Seng a small 0.3% gain. Talk surrounding Chinese markets shifted away from economic data toward market internals as the main factor driving trading. The ban on selling by large shareholders on the Shenzen exchange is scheduled to end on Friday and anticipation of this may have been exacerbated Monday’s weakness. The PBOC was also active overnight putting more short term cash into the system and apparently intervening to keep CNY from falling too far too fast.
European markets, meanwhile, have started a second straight day this year on the back foot. Better than expected employment reports from Germany and Spain have been ignored with traders fixated on a weaker than expected Eurozone inflation report which has sent EUR and continental indices sharply lower.
US indices are also down so far today but are only down about half as much as their European counterparts once again and so far have been holding significant round numbers including 17,000 on the Dow and 2,000 for the S&P 500. There’s no major US news today but traders may continue to react to yesterday’s weak US PMI numbers and position ahead of tomorrow’s ADP payrolls report.
Crude oil is trading down slightly today. So far this week, trading has bounced between fear that growing tensions between Iran and Saudi Arabia could lead to hostile actions that disrupt supply, and fear that political tensions could drive both countries to ramp up supply and depress prices in a bid to bankrupt their adversary. So far today, the latter price bearish case appears to have the upper hand.
We’re still seeing some of the capital coming out of stocks moving back into defensive havens. Even though USD has been rising boosted by the falling EUR, gold and JPY continue to rally as well, both outperforming the greenback. CAD is outperforming NOK by a wide margin today confirming a westward flow across the Atlantic.
There have been no major corporate announcements so far today.
Significant announcements released overnight include:
Norway manuf PMI 46.8 vs previous 47.6
UK construction PMI 57.8 vs street 56.0
Spain unemployment change (55K) vs street (50K)
Germany unemployment change (14K) vs street (8K)
Germany unemployment rate 6.3% as expected
Eurozone consumer prices 0.2% vs street 0.3%
Eurozone core CPI 0.9% vs street 1.0%
Upcoming significant announcements include:
8:30 am EST Canada industrial prices street 0.0%
8:30 am EST Canada raw material prices street (2.5%)
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