The selloff in global equities that started last week continues to accelerate with a number of factors coming together all at once to drive a flight to defensive positions. 1) European indices are leading the way lower today as Italy fell back into recession with another quarter of negative GDP while German factory orders and retail PMI also disappointed. There have been broad based declines of 1% or more with the MIB losing over 500 points and breaking 20,000. This along with the bailout of the Portuguese bank Espirito Santo and the potential fallout from sanctions against Russia indicates growing economic and financial risks across the continent. 2) Growing political tensions in the Ukraine and elsewhere plus the spread of the Ebola virus in West Africa have put focus back on the potential impact of external factors on markets. 3) Meanwhile more good economic news is out today from North America where Canada posted a better than expected trade surplus and the US a better than expected trade deficit which has boosted USD on anticipation that the FOMC may have to move sooner than previously thought. 21st Century Fox’s decision to abandon its pursuit of Time Warner may be a sign that liquidity may be starting to dry up. 4) All of this comes together just as we enter August and September, historically the seasonally weakest time of the year for stocks. The liquidity driven rally of recent months had apparently priced stocks for perfection and with support from strong earnings reports drying up as the end of earnings season approaches, a retrenchment appears to be underway. Capital coming out of stock markets appears to be finding its way back into defensive havens. The clearest example of this is in Japan where the Nikkei is falling and JPY soaring.. Meanwhile, gold and silver are rallying today with gold regaining the $1,300/oz level once again and CHF is holding its own against a strengthening USD. European currencies have fallen to the bottom of the performance pile on the continent’s struggles ahead of tomorrow’s Bank of England and ECB meetings. The ECB may come under pressure to accelerate its stimulus plans in the face of the Eurozone’s struggles. Corporate News Walgreen has agreed to purchase the 55% of Swiss drugstore company Alliance Boots it doesn’t already own for $15.3B and plans to keep its corporate headquarters and pay tax in the US. 21st Century Fox has abandoned its pursuit of Time Warner blaming the other side’s refusal to talk, and a drop in its own stock price since its takeover plans were announced and instead announced plans for a $6B stock buyback. Time Warner had rallied previously on takeover speculation some of which could be unwound today. Time Warner $0.98 vs street $0.84 First Solar $0.04 vs street $0.33, Sales $544M down from $950M in the previous quarter and way short of street $807M, maintains $2.40-$2.80 guidance for the year Walt Disney $1.28 vs street $1.17 Activison Blizzard $0.06 vs street $0.02, raises FY guidance to $.129 from $1.27 EOG Resources $1.45 vs street $1.37, raises dividend by 34% Chesapeake Energy $0.36 vs street $0.44 Tim Hortons $0.92 vs street $0.86 Molson Coors $1.57 vs street $1.47 Economic News Economic reports released overnight and this morning include: Canada trade balance $1.8B vs previous ($0.1B) US trade balance ($41.5B) vs street ($44.6B) Germany factory orders (2.4%) vs street 1.1% UK Halifax house prices 10.2% vs street 9.6% UK industrial production 1.2% vs street 1.5% UK manufacturing production 1.9% vs street 2.1% Greece consumer prices (0.7%) vs street (0.9%) Italy GDP (0.3%) vs street 0.1% vs previous (0.5%) Italy industrial production 0.4% vs street (1.1%) Germany construction PMI 48.2 vs street 45.5 Germany retail PMI 52.1 vs previous 56.2 France retail PMI 45.6 vs previous 47.6 Eurozone retail PMI 47.6 vs previous 50.0 NZ employment change 3.7% vs street 4.0% NZ unemployment rate 5.6% vs street 5.8% and previous 6.0% Economic reports due later today include: 10:30 am EDT US crude oil inventories previous (3.6 mmbbls)