It looks like we could be heading into another active day of trading in Asia Pacific markets. Momentum is downward once again heading out of the US and European sessions which saw markets on both sides of the Atlantic finish down about 1-2%. Trading was halted on the NYSE for several hours due to a technical glitch. Although other markets were able to step up and keep things going, the shutdown certainly didn’t help matters.
Greece was fairly quiet today with the country asking for a new 3-year support program from the European Stability Mechanism (ESM) and promising to implement tax and pension reforms next week being seen as a start, although Germany and its followers still appear to be unwilling to budge on debt relief heading into Sunday’s showdown. Meanwhile the IMF continues to call for debt reduction with the US apparently pressing for a deal as well.
USD fell early in the day enabling EUR and gold to bounce back a bit and tumbled further following FOMC minutes from June. Indications that opinions were mixed about interst rate liftoff with some concern that the US economy wasn’t ready even before the China and Greece situations really unravelled boosted the side calling for a 2016 liftoff briefly but that was quickly quashed by comments from San Francisco Fed President Williams.
President Williams indicated he remains in wait and see mode but still expects a hike this year and believes it’s better to start sooner and raise gradually then wait and have to raise more aggressively. He also suggested the EU can contain fallout from Greece and China has the tools to deal with its economic and financial problems suggesting that the risk of contagion spreading to the US may be limited.
Tomorrow Fed Governor Brainard speaks with traders watching to see if she will build on recent comments about raising rates this year from fellow permanent voters Governor Powell and Vice Chair Fischer, or ally with the dovish camp.
Despite the comments from President Williams, there have been indications that the China market crash may be spreading. With Chinese officials having taken a number of steps to reduce selling pressure including halting stocks and ordering some parties not to sell for six months (which may just drag the instability on for months) bears have started to look elsewhere. 24 hour overnight trading has seen the Nikkei
plunge overnight and the S&P/ASX follow it lower at a more moderate pace. Crude oil also fell again pulling CAD and NOK down with it as Iran negotiations continue and US crude oil inventories rose for a second straight week.
In addition to the big macro events driving trading there are also a number of news items for Asia Pacific traders to chew on today that could move markets. Alcoa kicked off US earnings season with a miss, suggesting a difficult second quarter may drag on corporate earnings around the world. Australia jobs and China inflation figures are also on the way which could influence trading in both countries stock markets, plus copper AUD and NZD.
Alcoa $0.19 vs street $0.23
Significant announcements released overnight include:
US DOE crude oil inventories 0.4 mmbbls vs street 0 mmbbls
US FOMC minutes
UK budget highlights 2015 GDP forecast cut to 2.4% from 2.5%
2016 GDP forecast unchanged at 2.3%
2015/16 deficit to GDP forecast at 3.7%
Budget surplus expected in 2019/20
2015/16 Debt/GDP forecast 80.3%
£8.0B in new funding for national health service
£12.0B in welfare cuts to continue as planned
Corporation tax to fall to 19% in 2017
New 8% surcharge on banks starts Jan 1 2016
Public sector pay increases 1% next four years
UK BRC shop prices (1.3%) vs previous (1.9%)
UK Halifax house prices 9.6% vs street 8.3%
Upcoming significant announcements include:
11:30 am AEST China consumer prices street 1.3%
11:30 am AEST China producer prices street (4.6%)
11:30 am AEST Australia employment change street 0K
11:30 am AEST Australia full time previous 15K
11:30 am AEST Australia part time previous 27K
11:30 am AEST Australia unemployment rate street 6.1%
7:00 am BST Germany trade balance street €20.5B
7:00 am BST Sweden unemployment rate previous 3.7%
10:00 am BST Greece consumer prices street (2.4%)
10:00 am BST Greece unemployment rate street 25.6%
12:00 pm BST UK interest rate and QE target no changes expected
8:15 am EDT Canada housing starts street 190K
8:30 am EDT Canada new house prices previous 1.1%
8:30 am EDT US jobless claims street 275K
9:00 am EDT IMF world economic outlook
10:15 am EDT FOMC Governor Brainard speaking
10:30 am EDT US natural gas street 87 BCF