12 September 2016 at 11:30 GMT
Risk-off sentiment has clattered equities helping to send Dax down by 3% on the day so far. With a raft of US Federal Reserve speakers on tap today, expect every word to be analysed for rate-hike intentions in the sort of detail Kremlin watchers used to apply to the old Soviet Politburo. Sharp moves could be in play across assets depending on interpretation.
- US Fed’s Lockhart (1205 GMT)
- US Fed’s Kashkari (1700 GMT)
- US Fed’s Brainard (1715 GMT)
- Australia RBA’s Kent (2230 GMT)
EURUSD is having an interesting day, attempting to reach again to the lows of Friday, which were roughly around 1.12. The market is anticipating the possibility of the rate hike in September, giving USD-index additional strength, which is now seen in most of the USD crosses throughout the market. Several Fed officials speaking today so watch out forsigns of the upcoming hike/non-hike. GBP: GBPUSD has seen better days, shifting below the 200-day exponential moving average, and is currently traded at 1.3259. A very important data point for sterling is expected tomorrow with UK monthly inflation figures published at 0830 GMT.
FX Options volatilities
Higher volatility is evident in most major currency pairs today. There has been demand for all tenors, with selling interest only at the very front end like one-day and 1-week.
Notable trades include:
• EURUSD 1.1300 calls, EU204m, Sept. 16
• EURUSD 1.1350 calls, EU123m, Sept. 15
• USDJPY 99.50 puts, $250m, Oct. 12
• USDJPY 101.00 puts, $400m, Dec. 12
• USDJPY 102.75-106.00 call spread, $250m, Nov. 8
• AUDUSD 0.7625 calls, A$957m, Sept. 19.
Correlations remain upside down as government yields climb in sympathy with global risk-off sentiment. The German 10-year yield is now firmly back into positive and at the highest level since Brexit. Credit is seeing a tumultuous start to the week as well as XOVER once again faces a rejection from the 300 bps level and has now gained 25 bps since Friday morning in what is also the most dramatic move since the Brexit decision.
European shares continued the negativity from Friday’s 400-point downward move in the Dow and APAC’s 2- % losses overnight.
Markets are concerned about the speculation surrounding a Fed rate hike in the near future and whether central bank stimuli has reached its effective limits.
The Stoxx 600 was down nearly 2% in a broad-based selloff with basic resources (- 3.7%) and the banking sector (-2.6%) falling the most.
E.ON is today’s worst Stoxx performer with the shares down 12% after spinning off its Uniper division and receiving several Tier-1 analyst downgrades.
In the UK, Associated British Foods fell 7% after releasing a trading update with traders citing difficult trading conditions for its flagship retailer Primark.
German gas and engineering firm Linde fell 8% as Praxair terminated merger talks.
On the plus side, SVG Capital rallied 14% as HarbourVest announced a final cash offer of 650p a share; valuing the UK listed private equity firm at just over £1bn.
US equity index futures trade 0.5% lower this morning and Manchester United are the only notable name releasing earnings today.
Mid-session Europe is part of TradingFloor's stable of commentary running through from the US close, through Asia to the European session. Click below to keep abreast of all the developments as they happen.
We are back to that old chestnut as speculation on a US Fed move in
September mounts and numerous board members take to the stand. Photo: iStock
— Edited by Martin O'Rourke