Following a sleepy overnight session, US futures are flat as are markets in Europe, while Asian stocks rose despite overnight trade data from China which unexpectedly missed across the board. As reported last night, Chinese export growth was the slowest since February while Import growth the weakest since Dec 2016, as both missed consensus estimates...
Paradoxically, the bad report sent the MSCI EM Asia stock index higher for a third day to its highest since November 2007, with the poor Chinese trade data promptly spun as positive: "It looks like China’s trade data is taken as a half-full omen with the softer (than expected) exports mitigating risks of U.S. protectionism,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank in Singapore."
Continuing an unprecedented run of record highs, global stocks inched up to a new all-time high on Tuesday, shrugging off China's data. The MSCI's all-country world index ticked up to set a new record high at 480.76 points. It was last up less than 0.1 percent at 480.54 points. The index, which tracks shares in 46 countries, is on track for longest monthly winning streak since 2003. According to Reuters, "shares across the globe have been hitting record highs in record low volatility supported by a benign environment for global growth." "Data continue to suggest a synchronized global expansion across both advanced and emerging market economies. Spill-overs from the rebound in emerging market demand are reflected in the fastest growth in world trade since 2010," said Fitch.
The Chinese trade data was so poor, pardon great, the Chinese yuan (and South Korean won) led gains as emerging Asian currencies advance on a broadly weaker U.S. dollar. The onshore yuan strengthened as much as 0.4% to 6.6970 vs USD for biggest intraday rally since July 27, rising above 6.7 for the first time since October...
In currency markets, the dollar dipped for a second consecutive day after rising on Friday following stronger-than-expected U.S. jobs numbers, which some analysts said bolstered the case for the Federal Reserve to raise interest rates further. However, many in markets remain unpersuaded the Fed will increase the cost of borrowing again this year. St Louis Fed President James Bullard said on Monday the central bank could leave rates where they are for now because inflation was not likely to rise much.
"(They) seemed to oppose further rate hikes. That means they exactly reflect the current market expectations, which are limiting the dollar’s appreciation," wrote analysts at Commerzbank in Frankfurt in a morning note to clients. "It is still inflation that poses the problem," they added
Overnight the Aussie dollar advanced on rising business confidence but, unlike the Yuan, was weighed down by disappointing China trade data. The Euro rose for second day as upside momentum remains strong, and last Friday's strong payrolls beat is largely forgotten. West Texas Intermediate crude started on the back foot but reversed during European hours; WTI crude continued its rise, and is rapidly approaching $50 again: the question is whether it can take out the resistance level and hold above it.
This morning, all eyes will be on the South Africa’s rand as lawmakers prepare to decide the fate of President Jacob Zuma in a secret ballot at 2:00pm local time (8:00am ET). The currency steadied after yesterday’s jump even as 1-week implied vol surged to a 4 month high...
Markets remain in a holding pattern, with investors seeking catalysts amid the summer slowdown and the S&P hasn't moved more than 0.3% intraday for 13 consecutive days: the longest stretch on record. The focal point of this week looks set to be Friday’s U.S. inflation data, which will be key to the interest-rate outlook of the world’s biggest economy, Bloomberg writes. Two Federal Reserve officials said on Monday that soft inflation was a problem, but played down the risk of market disruption when the central bank starts shrinking its balance sheet.
“Markets are in sleep mode,” Forextime Ltd, a retail currency broker, wrote. “Limited news flow is what can be blamed for the narrow trading ranges, but expect this to change as we get closer to Friday’s U.S. CPI release.”
MSCI's broadest index of Asia-Pacific shares outside Japan proved relatively resilient, inching up 0.2 percent and back toward decade highs. Hong Kong's Hang Seng closed up 0.6 percent. South Korea dipped 0.2 percent, while Japan's Nikkei eased 0.3 percent and China's main markets edged up 0.1 percent. Japan’s Topix index fell 0.2 percent at the close with SoftBank Group Co. declining even after profit topped estimates. Sony Corp. gained after it was added to the JPX-Nikkei Index 400. Australia’s S&P/ASX 200 Index lost 0.5 percent and South Korea’s Kospi index dropped 0.2 percent.
The Stoxx Europe 600 Index was slightly weaker, headed for a second day of declines as most benchmark gauges in the region fell, though moves were not large. Germany’s DAX Index declined less than 0.05 percent while the U.K.’s FTSE 100 Index sank 0.1 percent. The MSCI All-Country World Index rose less than 0.05 percent to the highest on record. Energy company shares rose as oil prices steadied from recent falls as sources told Reuters Saudi Arabia would cut crude supplies next month.
Futures on the S&P 500 Index dipped 0.1 percent to 2,475.25. Treasuries were little changed before a $24 billion three-year note auction, the first of three debt sales this week.
In currencies, the euro climbed 0.1 percent to $1.1814. The Bloomberg Dollar Spot Index fell 0.1 percent, the largest fall in more than a week on a closing basis. The British pound declined less than 0.05 percent to $1.3044. South Africa’s rand rose less than 0.05 percent to 13.2396 per dollar.
In rates, the yield on 10-year Treasuries rose one basis point to 2.26%. Britain’s 10-year yield climbed one basis point to 1.14%.
In commodities, gold gained 0.2 percent to $1,260.24 an ounce, the biggest rise in more than a week. West Texas Intermediate crude rose 0.6% to $49.48 a barrel, the highest in more than a week.
# Market Snapshot;
- S&P 500 futures down 0.06% to 2,476.00
- STOXX Europe 600 down 0.05% to 381.83
- Nikkei down 0.3% to 19,996.01
- Topix down 0.2% to 1,635.32
- Hang Seng Index up 0.6% to 27,854.91
- Shanghai Composite up 0.07% to 3,281.87
- Gold spot up 0.3% to $1,260.97
- U.S. Dollar Index down 0.2% to 93.30
- Euro up 0.2% to 1.1813 per US$
- Brent Futures up 0.3% to $52.54/bbl
# Top Overnight News;
- Republicans struggling to pass a major tax overhaul that doesn’t add to the federal deficit are discussing a kind of compromise: mixing permanent revisions with temporary rate cuts for individuals and businesses
- St. Louis Fed President James Bullard and Minneapolis’s Neel Kashkari said soft U.S. inflation was a problem, broadly in line with expectations that officials will keep interest rates on hold when they meet next month and announce the start of a gradual process to trim their holdings of Treasuries and mortgage-backed securities.
- South Africa’s rand could surge if President Jacob Zuma is ousted by a motion of no confidence in the nation’s parliament, though gains would reverse if Zuma survives the vote, analysts say
- China’s trade surplus widened for a fifth month in July as export growth remained solid and imports moderated, keeping the spotlight on a trade gap U.S. President Donald Trump aims to narrow
- Google Fires Author of Divisive Memo on Gender Differences
- Citigroup Agrees to $130 Million Settlement of Libor Claims
- China’s Trade Surplus Widens for Fifth Month as Imports Moderate
- Pfizer Is Said to Weigh Sale of Erectile Dysfunction Treatment
- Liberty Global 2Q Operating Cash Flow Beats Highest Estimate
- Rental Car Stocks May Move After Avis Cuts Profit Forecast
- InterContinental First Half Revenue Misses Estimates
- Pandora CEO Warns of Challenging U.S. Market Ahead; Shares Sink
- McDonald’s to Increase Restaurants in China to 4,500 from 2,500
- Disney, Fox May Move After Positive Ad Market Comments From CBS
- AMD to Shift Some Orders to TSMC: Commercial Times
- China Keeps More Steel at Home as Exports Tumble to 2013 Low
- Wells Fargo Is Said to Face SF Fed Inquiry on Car Insurance: NYT
*) Asian equity markets failed to sustain the momentum from the record closes seen in DJIA and S&P 500, as sentiment in the region soured amid relatively quiet news flow and as participants digested the latest Chinese trade data. ASX 200 (-0.6%) and Nikkei 225 (-0.3%) saw early selling pressure, with the Australian market the underperformer on broad based declines, aside from the mining sector which remained resilient after continued gains in iron ore prices. Hang Seng (+0.6%) and Shanghai Comp (+0.1%) were initially subdued after Chinese Imports and Exports both missed estimates, while regulatory concerns also persisted with the PBoC seeking to tighten fintech rules to prevent risks. However, both indices then recovered heading into the close. 10yr JGBs were flat as demand failed to garner support from the deterioration of risk tone in the region, while the 30yr auction was also uneventful with the results relatively in-line with the previous month.
*Chinese Trade Balance (CNY) (Jul) 321.2bln vs. Exp. 293.55b1n (Prey. 294.30bn).
*Chinese Exports (CNY) (Jul) Y/Y 11.2% vs. Exp. 14.8% (Prey. 17.3%)
*Chinese Imports (CNY) (Jul) Y/Y 14.7% vs. Exp. 22.6% (Prey. 23.1%)
*Chinese Balance of Trade (USD) (Jul) 46.70bln vs. Exp. 45.00bln (Prey. 42.75bn).
*Chinese Exports (USD) (Jul) Y/Y 7.2% vs. Exp. 11.0% (Prey. 11.3%)
*Chinese Imports (USD) (Jul) Y/Y 11.0% vs. Exp. 18.0% (Prey. 17.2%)
# Top Asian News;
- HNA’s Singapore Partner Is Said to Explore Scaling Back Ties
- China Developers Sink as World’s Biggest Stock Rally Loses Steam
- Sony Bonds Lose Allure as Spread Too Tight, Says BNP Paribas
- Goldman Sachs TP Upgrade Pushes China Harmony to 11-Month High
- Hong Kong Stocks Advance on Earnings Optimism and Auto Sales
- Malaysia Weighs Dual-Class Shares as Exchanges Battle for IPOs
- Reliance Is Said to Plan Refinancing as $12 Billion Debt Matures
- Profit-Taking? SoftBank Drags Topix Down Despite Strong Earnings
*) Directionless trade in another quiet European summer trading session (Eurostoxx 50 flat), material names falling after mixed Chinese trade data as exports and imports missed expectations. Pandora among the worst performers in Europe following soft financial results. BTPs outperforming largely as yields fall to 6-week lows. As a reminder, yesterday's monthly bond purchases from the ECB showed the ECB bought more Italian bonds in July than the capital key would imply, as it bought EUR 9.623b1n Italian bonds, almost EUR 1.5bln more than the capital key would dictate. In turn, this has the GER-ITA 10Y spread tighten as much as 13bps.
# Top European News;
- Rising U.K. Energy Imports Need Brexit Care, Centrica Says
- ECB Redemptions Boost Average Maturity of French Bond Purchases
- AA Hits Record Low; Credit Suisse Downgrades on Roadside Outlook
- Standard Life Has $4.8 Billion Outflows Before Aberdeen Deal
- Siltronic Drops After Sumco Wafer Capacity Expansion Plan
- Power Maker CEZ Boosts 2017 Earnings Forecast on Higher Margins
- Brexit Bill Somewhere Between Zero and EU100B, Jones Says
- U.K. Must Provide Clarity on Post-Brexit Laws, Top Judge Says
# In currencies, the Aussie saw some selling pressure following the Chinese Imports and Export misses on expectations. AUD/USD came off best levels overnight and is could look to retest 0.79. The greenback struggled throughout the US and Asian sessions, as the gains seen on Friday were retraced. Fed speech was the them in the US yesterday, however, comments from Bullard and Kashkari were largely rebuffed by markets. A marginal flight to safety further weighed on the US dollar, as twitter reports stated US satellites detected North Korea moving 2 anti-ship cruise missiles to patrol boat on the east coast over the past few days, according to officials. Both EUR & GBP gained ground against the dollar, with cable looking for a break of 1.3050, however, ran into some offers around 1.3055. EUR/USD saw similar price action, breaking through 1.18, however finding some resistance above these levels. In the Yen, a spike through Friday's post NFP range caused some escalated selling pressure in USD/JPY, as the pair broke through 110.70 overnight, bears will look to target the 110.00 handle to spark any continued downside pressure
# In commodities, relatively quiet in the commodity complex with oil prices slightly firmer. Of note, industry sources noted that Saudi Arabia noted that Saudi Arabia is to cut crude allocations in September by at least 520k bpd. Australia July Port Hedland iron ore exports fell to 37.9mln tonnes vs. Prey. 43.lmln tonnes. China Commodities Trade Data showed July YTD copper and product imports fell 15.2% Y/Y to 2.62m1n tonnes.
# Looking at the day ahead, there is the NFIB small business optimism index for July (103.5 expected) and the JOLTS job openings data. In China, the July CPI (1.5% yoy expected) and PPI (5.6% yoy expected) data will be out in early Wednesday morning. Notable US companies due to report include: Walt Disney....