This page has been archived and commenting is disabled.
Asian Fat Finger Roils An Otherwise Boring Overnight Session
Starting with the Asian markets this morning, it appear the roller coaster ride for markets continued overnight. Asian equities started the day trading weaker but shortly after the open though, all of Asia bounced off the lows following the previously noted surge in Chinese A-shares soaring more than 5% in a matter of minutes in what was initially described as a potential “fat finger” incident. As DB notes, alternative explanations ranged from a potential restructuring of the government’s holdings in some listed companies, to market buying ahead of a rate cut this coming weekend. All indications point toward a fat finger. The A-share spike has managed to drag other indices along with it though some gains have been pared. Yet for all the drama the Shanghai Composite soared... and then closed red. The region’s underperformer is the Nikkei (-0.75%). Elsewhere, the NZDUSD dropped 0.5% after a magnitude 6.8 earthquake struck the city of Wellington this morning.
Looking at the US S&P500 futures are trading modestly higher at 1660. Looking ahead to today there is very little in the way of Tier 1 data to be expected. Housing starts/permits from the US and the preliminary UofM Consumer Sentiment reading for August are the main reports. The moves in rates and perhaps oil will probably offer some markets some directional cues.
A recap :
- Chinese prop trading house Everbright Securities confirmed they are looking into the CNY 7bln trade error which occurred overnight which saw the Shanghai composite momentarily spike higher by 5% before paring the entire move and closing down by 0.7%.
- Suez Canal ship traffic normal amid unrest in Egypt according to Inchcape.
- Even though today sees number of equity options expiry, stocks traded steady amid light macroeconomic news flow.
The overnight bulletin from Bloomberg:
- Treasuries headed for weekly declines, with biggest losses seen in 5Y, 7Y and 10Y maturities as better than forecast eco data added support to thesis of imminent Fed tapering.
- St Louis Fed’s Bullard said in a press briefing yesterday that the Fed could begin dialing back asset purchases with small moves rather than large, aggressive ones, WSJ reported
- Euro-area exports increased for the first time in three months, led by a rebound in Germany, while inflation held steady at 1.6%
- China performed live-fire military exercises in the East China Sea as part of drills the army said were routine, as tensions simmered with Japan over islands in the area claimed by both countries
- Egypt’s Muslim Brotherhood urged supporters onto the streets after noon prayers to protest the killing of hundreds of their number by security forces in a crackdown that sparked nationwide clashes and the imposition of emergency rule
- Sovereign yields mostly lower. EU peripheral spreads mostly tighter, Euro Stoxx Banks index gains. Nikkei falls 0.75%, as JPY holds near 97.41. European stocks mixed, with DAX and FTSE posting declines. U.S. equity index-futures gain. WTI crude and gold fall, copper gains
Market Re-Cap via RanSquawk
Equities traded steady in Europe this morning, albeit in minor negative territory, as absence of any pertinent macroeconomic news flow meant that market participants were left with little to guide the price action across various asset classes. After opening lower, Bunds gradually closed the gap, with SP/GE trading tighter by 4bps, supported by better buying from domestic and other real money accounts. Looking at the UK curve, touted short covering was observed in the 5y sector of the curve, which was prompted by a failure to break 81bps mark (July wides).
Overnight in Asia, Chinese prop trading house Everbright Securities confirmed they are looking into the CNY 7bln trade error which occurred overnight which saw the Shanghai composite momentarily spike higher by 5% before paring the entire move and closing down by 0.7%. The error came as result of a mock trading platform being accidentally made live and investing heavily in Chinese financials.
Going forward, market participants will get to digest the release of the latest U. Michigan survey and the NY Fed will conduct its latest Outright Treasury Purchase op.
Asian Headlines
Chinese markets initially underperformed, but then soared instantaneously with the Shanghai Comp. spiking over 5% in around 90 seconds, which was rumoured to be a CNY 7bln fat finger trade by Everbright Securities. Some desks are also attributing the spike higher in Chinese equities to rumours of a potential rate cut from the People's Bank of China.
EU & UK Headlines
Eurozone CPI (Jul F) Y/Y 1.6% vs. Exp. 1.6% (Prev. 1.6%)
Eurozone CPI (Jul F) M/M -0.5% vs. Exp. -0.5% (Prev. 0.1%)
Eurozone CPI Core (Jul F) Y/Y 1.1% vs. Exp. 1.1% (Prev. 1.1%)
EU Trade Balance (Jun) SA M/M 14.9bln vs. Prev. 14.6bln (Rev. 13.8bln)
EU Trade Balance (Jun) NSA M/M 17.3 bln vs. Prev. 15.2bln (Rev. 14.5bln)
Citi says BoE governor Carney may strengthen the message of forward guidance as short sterling is too cheap.
US Headlines
House conservatives say grassroots support is building for their effort to risk a government shutdown to defund ObamaCare. Conservatives who back the strategy said their spines have been stiffened by support at town hall meetings.
Equities
Equities traded steady in Europe this morning, albeit in minor negative territory, as absence of any pertinent macroeconomic news flow meant that market participants were left with little to guide the price action across various asset classes. Tech sector underperformed in Europe, as market participants reacted to the release of less than impressive earnings report from Applied Materials after the closing bell yesterday. The company reported Q3 adjusted EPS USD 0.18 vs. Exp. USD 0.19, Q3 revenue USD 1.98bln vs. Exp. USD 2.06bln.
FX
EUR/USD and GBP/USD traded in a tight range, with USD/JPY also relatively steady in spite of a number of good sized options expiring today. Large options are said to be placed between 97.00 to 98.10 levels and volatility is expected to increase closer to today’s NY cut at 1500BST.
USD/INR hit all time record high at 62.0050 as new restrictions failed to contain volatility amid the ongoing expectation of Fed QE tapering in September and instead prompted some to question whether new restrictions will do more harm than good.
Commodities
Egypt said that president Obama's remarks on Egypt were not based on 'facts' and will strengthen and encourage violent groups. There were also reports that the Muslim Brotherhood called on Egyptians to rally today in a nationwide 'millions march of anger'.
Suez Canal ship traffic normal amid unrest in Egypt according to Inchcape.
Demand surges for copper in China. (FT-More)
Chinese copper premiums – that is, the cost of physical copper over and above the benchmark futures prices – have more than tripled since the start of the year to a high of more than USD 200 a tonne.
* * *
Without much commotion, the S&P 500 (-1.43%) fell for the 7th day in 9 yesterday and suffered its worst day since June 20th. Interestingly the index last night closed back below the then high for the year on May 21st which coincided with Bernanke's now infamous JEC testimony where the tapering flag was first raised. So given that 10 year yields have gone from 1.93% then to 2.79% now (high of 2.82% yesterday) and that US equities are down its fair to say that overall the tapering story has caused some notable damage to markets even if we've recovered significantly from the June lows in equities, credit and EM.
The US weakness followed a pretty weak session in Europe which deteriorated with soaring rates (in both DM and EM) and a continued focus on oil and the troubles in Egypt. Whilst Treasuries rallied 5-6bps off the yield highs, US equities barely recovered from the intraday lows soon after the opening dive lower. The USD index gained 0.3% at the day’s highs helped by another low jobless claims print (more below) before losing all that and more to close 0.65% lower on the day. The gloomy outlook from Wal-Mart didn’t help as the retailer slashed its full year earnings guidance. Same store sales for the quarter ending July fell 0.3% whilst analysts were expecting a 0.9% gain. This marks the second consecutive decline in sales as customers felt the impact from higher social security taxes and gas prices. Wal-Mart also reduced its sales forecast for global growth to 2-3% for the year end of January 2014 (from 5-6%). Wal-Mart’s warning comes after the poor sales numbers from Macy earlier this week which points to a still fragile environment for the consumer despite improving headline data momentum. Away from the retail sector, Cisco’s softer-than-expected revenue forecast that hit the tapes post
Wednesday market close was also a drag to the market.
The data docket yesterday was more mixed. Jobless claims fell more than expected (320k v 335k) and the NAHB Housing market index posted a larger-than-expected rise (59 v 57) to the highest reading since November 2005. Headline US CPI (+2.0% yoy/+0.2% mom) and core CPI (+1.7%yoy/+0.2% mom) were in line with consensus. On the other hand, the Philly and NY Fed manufacturing reports were softer. The Philly Fed headline fell to 9.3 from 19.8 previously with underlying sub-components from new orders to employment also weaker. The NY Fed survey headline fell to 8.2 from 9.5 previously although the employment sub-index rose to 10.8 from 3.3 previously.
Briefly on the geopolitical pressure in Egypt, the death toll has apparently risen to at least 525 with more than 3000 injured according to a BBC report as the violence continued between security forces and protestors. Brent made its fifth consecutive daily gain yesterday to close whiskers away from the $110/bbl mark although prices are a little softer in Asia overnight. The UN Security Council is said to have held an emergency meeting on the Egypt situation at 5.30pm New York.
- 7358 reads
- Printer-friendly version
- Send to friend
- advertisements -

