Overnight Sentiment: Confused
One word explains the overnight action: confusion. After opening down 10 points just shy of unchanged for the year following fearful Asian trade, futures have rebounded and are now almost unchanged courtesy of a UK-market which is offline for the next two days, letting Europe take advantage of another day of impotent rumor-mongering and wolf-crying, this time focusing on a 7pm press conference in which Merkel will say more of the same vis-a-vis Europe's non-existence Banking Union, but at least Europe will have closed at the highs. Not much on today's docket so expect more kneejerk reactions to rumors, which have a positive half-life measured in the minutes.
Full overnight recap from BofA:
Overnight, Asian equity markets finally got to react to the weak US employment report and most of the region's markets finished sharply lower as fears spread of a global economic slowdown. The worst-performing market was the Korean Kospi, down 2.8%. The Shanghai Composite wasn't far behind falling 2.7%. Meanwhile, the Hang Seng lost 2.0%, the Japanese Nikkei fell 1.7% and, on the flip side, the Indian Sensex actually managed to finish up 0.2%.
In Europe, equity markets are mixed. Blue chips are up 0.5%, while shares listed on the German DAX are down 1.2%. Markets in London are closed today and tomorrow for a bank holiday. At home, there looks like there will be no bounce back from Friday's 2.5% drop, as futures are pointing to a 0.2% lower opening later today.
In bondland, Treasury yields are slowly drifting higher, but volume so far has been light due to the bank holiday in London. The 10-year is up 5bp, to 1.50%, while the long bond is up 4bp, to 2.56%. In Europe, German bunds are up 3bp, to 1.20%, while yields on Italian 10-years are 10bp lower, to 5.74%, and Spanish 10-year yields are down 3bp, to 6.43%.
The dollar is marginally weaker against a basket of other major currencies. The DXY index is down 0.1%. In the commodity markets, gold is basically flat, at $1,624.13 an ounce, and WTI crude oil is $1.41 a barrel cheaper, at $81.80.
Overseas data wrap-up
Not surprisingly, investor confidence in the Euro area headed lower in the latest Sentix Euro area investor confidence survey. The index fell to -28.9 in June from -24.5. The index is now at its lowest level since the summer of 2009. Looking ahead, investor confidence in the region will likely continue to head lower as the Euro area crisis falls further into recession and questions about the future of the region remain unanswered.
The week's events
The data flow slows following a busy week. The highlight will be Fed Chair Bernanke when he testifies on the economic outlook at a U.S. Congress Joint Economic Committee hearing on Thursday. To QE or not to QE, that will be the question. We will also get the Beige Book on Wednesday; we will be looking for anecdotal evidence of the slowdown observed in the hard data. The ISM non-manufacturing survey on Tuesday will likely show slower growth.