For the last several days, major world indices have been teetering. A big six week rally has been winding down but it wasn’t clear if overbought conditions would be dealt with through an extended period of sideways trading or a downward correction. Today traders have received their answer. Overseas stock markets have fallen off a cliff overnight with the Nikkei and Dax both falling 2.4%, while the FTSE has fallen 1.5%. US index futures are also trading lower this morning with Dow and S&P futures trading down 0.7%-0.9% but this still means we could see the Dow open down over 100 points. The main excuse for the takedown today appears to be weaker than expected service PMI reports from around the world. Yesterday a number of secondary US indicators like factory orders came in soft and overnight, service PMI reports for many countries have been disappointing, particularly Australia and France which fell back under 50 into contraction territory and Japan which fell back to 50 on the nose. The UK and Singapore were the two bright spots which may help to explain why the FTSE is down less than its continental counterparts so far today. Weak Germany factory orders haven’t helped either although this could be partly offset by better than expected Eurozone retail sales. Capital coming out of stocks has been finding its way into defensive havens, sparking rallies in the usual suspects USD, JPY, gold and CHF, with the Yen particularly strong overnight. Interestingly, crude oil, which led the move downward over the last few days, and mainland China indies, which led the big selloff in January, are trading flat to up today. This suggests that the current selloff is a trading correction following a big rally rather than a significant new downturn. Some of the weakness may also be related to some adjustments in expectations and valuations heading into earnings season which gets underway in earnest next week. US markets may also be active through the morning around trade and PMI reports. Speaking of stocks, Tesla Motors could find itself in the spotlight again today, this time for the wrong reasons after it announced Q1 production of 14,800 vehicles which was below its guidance of 16,000 vehicles. The company blamed the shortfall on parts supply issues and maintained its full year guidance, but it does raise the question of whether the company will be able to keep up with the thousands of orders streaming in for the new Model 3 scheduled to start rolling off the line in 2017? Corporate News Tesla Motors delivered 14.8K vehicles in Q1, below guidance of 16K hampered by parts shortages but it still expects to reach its 2016 delivery target of 80K-90K vehicles. Q1 Model S orders running 45% above last year. Economic News Significant announcements released overnight include: Australia RBA decision 2.00% no change as expected India RBI repurchase rate 0.25% cut to 6.50% as expected Germany factory orders 0.5% vs street 2.2% Germany factory orders/month (1.2%) vs street 0.3% Sweden industrial production 3.8% vs street 4.0% Eurozone retail sales 2.4% vs street 1.9% Australia trade balance ($3.4B) vs street ($2.5B) Japan cash earnings 0.9% vs street 0.2% and previous 0.4% NZ ANZ commodity prices (1.3%) vs previous 0.4% Service PMI reports: Australia 49.5 vs previous 51.8 Japan Nikkei 50.0 vs previous 51.2 Singapore Nikkei 52.0 vs previous 51.6 UK 53.7 vs street 53.5 Germany 55.1 vs street 55.5 Sweden 54.9 vs street 56.7 Spain 55.3 vs street 54.5 Italy 51.2 vs street 53.9 France 49.9 vs street 51.2 Upcoming significant announcements include: 8:30 am EDT US trade balance street ($46.2B) 8:30 am EDT Canada trade balance street ($0.9B) 9:45 am EDT US Markit service PMI street 51.2 10:00 am EDT US ISM non-manufacturing PMI street 54.2