S&P futures are sliding this morning, down 0.4% and tracking the accelerating decline in European and Asian stocks, driven by a move higher in global interest rates, which started with Japanese 10Y yields rising to 0.1% for the first time since February, but mostly Bund yields which spiked after tripping stops, and jumped as high as 0.53% for the first time since early 2016. Oil climbs, dollar and gold slide. Economic data include initial jobless claims, trade balance, Markit PMI readings. Fed representatives are due to speak. The main story of the otherwise quiet session has been the sharp move higher in bond yields, and particularly German 10y yields, which trended higher ahead of the release of the ECB minutes and large duration supply, extending losses after soft French auction results, and piercing the widely flagged 0.50% support level then rising as high as 0.53%, a 17 month high that saw declines quicken as futures volumes surged. French bonds were squeezed into the auction, before soft demand was seen with 30y bid/cover dropping to 1.53x vs 1.93x prior. Hedging related to the auction appeared to weigh heavily on bunds...
The Bund yield is up 30bps since June 23 low at 23bps, with the German 2/10 curve bear steepening by 5bps tp 112bps. The driver for the sudden weakness was a poor France 30y auction which was met with weak demand as bid/cover drops to 1.53x, tailing 11c. Bund futures volumes surged as stop barrier resistance was taken out and the the widely highlighted 0.50% level broken, with over 18k futures trading in a 1-minute period, the largest volumes of the session. The move above the YTD high level of 0.50% opens up the 200-week moving average at 69bps, according to Bloomberg technical analyst Sejul Gokal. As German bund yields were blowing out, their French peers rose six basis points and those on gilts added four. The yield on 10-year Treasuries rose 4 bps to 2.37%, after falling three basis points Wednesday.
"We believe a strategic short duration bias to core Europe looks attractive given the continuing improvement in the economic backdrop,” said the London-based Insight Investment. “We also expect the European Central Bank to announce a tapering of its asset purchases in September.”
While Germany bore the brunt of the selloff, the move was widespread and has hit virtually every DM...
Equities had a largely quiet session at least until the recent yield fireworks, with MSCI's index of Asia-Pacific shares ex-Japan closing down 0.1 percent overnight. Japan's Nikkei slipped 0.5 percent as a stronger yen depressed the outlook for export earnings. Japan’s Topix dropped 0.2 percent and the yen weakened by the same amount. The South Korean won slumped 0.6 percent to the lowest level since March. India’s Sensex advanced 0.5 percent, poised for a record close.
Trading in Asia has been buffeted this week by tensions on the Korean peninsula after North Korea fired a missile, which U.S. officials concluded was an intercontinental ballistic missile, into Japanese waters. In Europe, a modest early selloff accelerated as US traders walked to their desks, with the Stoxx 600 down 0.7% ahead of the ECB's minutes. Euro zone blue chips and Britain's FTSE 100 also hit a day'w los of -0.8%, on track for the biggest drop since May 18.
S&P 500 futures, which were mostly unchanged for much of the session, have dropped 0.4% after closing higher by 0.2% Wednesday on the back of the Nasdaq's 0.9% jump.
The other major mover of the session was oil, which clawed back some of its biggest loss in four weeks after data showed U.S. stockpiles declining. Brent oil was at $48.35 a barrel in early European trading as it recovered 1 percent of the 4 percent lost on Wednesday after rising OPEC exports had raised fresh questions about the group's plans to cut back supply. WTI crude futures rose 1.3 percent to $45.71 a barrel. The contract dropped 4.1 percent Wednesday, the most in four weeks, as Russia was said to oppose any proposal to deepen OPEC-led production cuts.
Gold was off 0.2 percent at $1,224.24 per ounce though it was up from an eight-week low of $1,217.14 it had hit the previous day.
The dollar meanwhile was stalled at 113.32 Japanese yen as it consolidated a near 1 percent gain this week and was also hovering at $1.13495 per euro. The Bloomberg Dollar Spot Index was little changed.
Traders have been wary of making any sudden moves before a flurry of U.S. data later, which includes ADP employment, ISM non-manufacturing PMI and the initial jobless claims report, all of which are appetizers ahead of Friday's Payrolls numbers.
Focus on Thursday will likely be on minutes from the latest European Central Bank meeting, and on private jobs data in the U.S. Minutes from the Fed showed a lack of consensus about when to shrink the central bank’s $4.5 trillion balance sheet, and how to approach policy strategy in a time of low inflation.
*) Bulletin Headline Summary from RanSquawk;
- Asian equities trimmed opening gains in what was a light session overnight with FX markets relatively rangebound
- European trade has been subdued as many await data
- Looking ahead, highlights include ECB minutes, ADP and DoEs
*) Market Snapshot;
- S&P 500 futures down 0.4% to 2,417.25
- STOXX Europe 600 down 0.74% to 380.15
- Nikkei down 0.4% to 19,994.06
- Topix down 0.2% to 1,615.53
- Hang Seng Index down 0.2% to 25,465.22
- Shanghai Composite up 0.2% to 3,212.44
- Brent Futures up 1.5% to $48.50/bbl
- Gold spot down 0.2% to $1,224.17
- U.S. Dollar Index down 0.1% to 96.16
- German 10Y yield rose 2.0 bps to 0.49%
- Euro down 0.05% to 1.1346 per US$
- Italian 10Y yield rose 4.6 bps to 1.865%
- Spanish 10Y yield rose 2.4 bps to 1.595%
*) Top Overnight News;
- Xi May Put Ball in Trump’s Court on Talks With North Korea
- Trump Weighs ’Pretty Severe Things’ for North Korea Over Launch
- Cerberus Is Said to Consider Commerzbank Stake in Bank Push
- Manhattan Home Sales Surge as Cuts Bring Prices to Buyers’ Level
- Global Payments Held M&A Talks With Worldpay, Dealreporter Says
- Facebook, Twitter, Snap Said to Seek World Cup Clips From Fox
- Electric Cars Seen Dominating by 2040 as Battery Prices Plunge
- Ford to Increase Focus Car Output in China for Exports to U.S.
- Toyota, Mercedes, Lincoln Earn Top Safety Pick Eluding Model S
- China Agency Orders VW, GM, Benz to Recall Takata Airbags
- Celgene to Develop, Commercialize BeiGene’s Cancer Drug
- Costco Wholesale June Comp Sales Beat Estimates
- Amex May Lose Fight Over EU Card Fee System: EU Court Aide
- Yuhan Rises After Signing Hepatitis C Drug Deal With Gilead
- SpaceX Successfully Launches 10th Falcon 9 Rocket of 2017
- John McAfee Settles Lawsuit Against Intel Over Use of His Name
- Toshiba Said to Mull Move to Western Digital Bid: Kyodo
*) Asia equity markets failed to sustain opening gains and traded mostly negative as a lack of drivers and weakness in energy suppressed sentiment in the region. ASX 200 (-0.1%) and Nikkei 225 (-0.5%) were both lower with energy among the underperformers after crude prices fell around 3%, while a firmer JPY kept Japanese exporters in check. Shanghai Comp. (-0.3%) and Hang Seng (-0.3%) were choppy as China's continued efforts to support business conditions was overshadowed after the PBoC refrained from liquidity injections and reiterated a prudent policy stance. 10yr JGBs were marginally lower and failed to benefit from the weak sentiment across the region, while the 30yr JGB auction results also failed to spur demand with the b/c virtually unchanged despite a decline in accepted prices from last month.
PBoC refrained from conducting open market operations for the 10th consecutive session. PBoC set CNY mid-point at 6.7953, Prey. 6.7922.
# Top Asian News;
- Konica, INCJ to Buy U.S. Gene Tester Ambry For $800 Million
- Singapore Luxury Home Prices Set to Recover, Guocoland Says
- IDFC, Shriram Group Said to Explore Merger, ET Now Reports
- Xi May Put Ball Back in Trump’s Court on Talks With North Korea
- Japanese Stocks Fall as Yen’s Appreciation Weighs on Exporters
- Short Sellers Burnt Again as Travel Agency’s Shares Take Off
- India States Unlikely to Borrow More in FY18: Official
- Siam Commercial Bank Said to Halt Insurance Unit Sale: Reuters
- Focus on BOJ’s Operation as 5-, 10-Year Yields Rise: Barclays
*) European bourses see another unexciting start this morning with indices failing to find any firm direction after the Fed minutes appeared to confuse markets over the future path for interest rates in the U.S. Downbeat earnings from Reckitt Benckiser (-2%) who also cut their guidance following the cyber-attack, ABF are among the best performers after they stated that their outlook had marginally improved. In fixed income markets, a slew of supply will hit with Spain, France and the UK. Selling pressure has been evident for Bunds consequently dragging T-notes lower as the German 10Y breaks above 0.5% and now trades at the highest level since Jan'16, (0.524%) while 17k sell contracts also adding to the pressure
# Top European News;
- Trump Gets Missile Deal, Request for Energy and Troops in Warsaw
- European TV Ad Trends Fail to Track Economic Revival: JPMorgan
- Norwegian Air Tumbles After CFO Departure, Traffic Figures
- Kepler Bets on European Small, Mid-Cap Value Stocks in 2H
- U.K. Working to ‘Mitigate’ White House Attitudes, Johnson Says
- Norwegian Air Says CFO Frode Foss Quits After 15 Years
# In currencies, overnight was a relatively muted affair in major FX pairs, EUR hovering within around 113.50 with yields keeping the currency afloat as the German 10Y approach 50bps, price action likely to be tame until ADP Employment Change (Exp. 185k). ECB minutes also scheduled, although this may provide little to no new information given recent comments from ECB's Coeure that the ECB have yet to discuss changing policy. Additionally, today there are around 3yards worth of expiries from 1.1290-1.1330. The FOMC minutes release last night delivered no meaningful surprises, which had been reflected in the price action where the USD edged a fraction higher, however the move was relatively muted, and eventually unwound. This saw USD/JPY make another push towards 113.50, however notable selling interest at these levels saw the pair back down to the low 113s. Yesterday's APIs provided a slight lift to commodity currencies with AUD back above 0.76 and CAD dipping past 1.2950. FX price action tame thus far as participants await the ADP data, with major pairs trading sideways this morning.
# Commodities have followed other asset classes with subdued trade this European morning. Volatility was seen in oil markets post the US close as the APIs reported a draw of 5.7mln barrels, resulting in slight reprieve to oil markets, which saw the 2% downturn yesterday. Gold continues to consolidate in the 1299.38 - 1218.00 range, as the yellow gold is seemingly resulting the week's risk appetite. Metals have struggled to find any direction through Asian and European trade as all majors have failed to see any movement above 1 %....