t’s been another rough night for stock markets around the world. Uncertainty in emerging Asia Pacific markets continues to overshadow sentiment after Vietnam devalued its dong in the wake of last week’s Chinese Yuan devaluation. This move sparked fears of an economic contagion and a potential currency war/race to the bottom.
Growing fears of destabilization in the world economy has sparked another round of capital outflows from stock markets not only in Asia Pacific markets but also in Europe and even the US, exacerbating seasonal uncertainty. Because of this, some capital appears to be finding its way back into defensive havens, particularly gold and CHF.
In Europe today, the focus has been on ratification votes on the latest Greek bailout deal. Germany voted to accept by a wide margin but we have yet to hear back from the Netherlands where the debate is expected to be more contentious and could end with a non-confidence vote on the government.
In the US, focus is on whether the Fed will start raising interest rates next month. Minneapolis Fed Governor Kocherlakota (the most dovish FOMC member) reiterated his stance that the central bank should wait for next year, while St. Louis Fed President Bullard (a known hawk) indicated he plans to argue for a rate increase next month. Headline and core inflation data came in as expected but a rise in weekly earnings indicates wage pressures are building increasing the potential inflation risks if the Fed waits too long.
FOMC minutes due this afternoon may spark another round of interest rate speculation trading, while crude oil inventories due later this morning could spark activity in energy markets.
Lowes $1.20 vs street $1.24, same store sales 4.3% above street 3.7%
Significant announcements released overnight include:
Germany’s Bundestag ratifies the latest Greek bailout deal in a 454-113 vote
State Bank of Vietnam devalued the Dong by 1% against USD and widened its trading band to 3% from 2% having already raised it from 1% last week
US consumer prices 0.2% as expected
US core CPI 1.8% as expected
US avg real weekly earnings 2.2% vs previous 1.8%
Japan trade balance (¥268B) vs street (¥53B)
Japan exports 7.6% vs street 5.2%
Japan imports (3.2%) vs street (8.2%)
Japan dept store sales 3.4% vs previous 0.4%
Japan machine tool orders 1.7% vs previous 1.6%
Poland industrial output 3.8% vs street 4.6%
Poland construction output (0.1%) vs street 0.0%
Poland producer prices (1.7%) vs street (1.6%)
Poland retail sales 1.2% vs street 2.9%
Upcoming significant announcements include:
10:30 am EDT US crude oil inventories street (0.75 mmbbls)
2:00 pm EDT US FOMC minutes
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