Article / 26 August 2015 at 7:00 GMT

Morning Markets: An unconvincing recovery

chart

 

Watchlist


  • UK: CBI Distributive Trades Survey (1000 GMT) 
  • Eurozone:  ECB's Mannheim speech in Germany (1040 GMT)
  • US: Mortgage Applications (1100 GMT) 
  • US: New Orders For Durable Goods (1230 GMT)

 A relief rally and bargain-hunting bonanza that sent US equities sharply higher on the opening yesterday evaporated soon afterwards as fear about China's ability to manage its economy seeped back into the market. The upshot? Jitters and unease spilled over into Asia and stocks across the region gyrated from positive to negative territory through the session.

And for once it was equity markets rather than forex that decided direction as various currency pairs including EURUSD and USDJPY shadowed the choppy ups and downs on major indices. Ranges have been tight and a decisive directional shift either way is unlikely to happen until equities calm down.

 But when will that happen? We're a long way clear of the woods because whatever way you look at it, worries about Chinese economic sustainability will continue to nag markets until we get the next update on the Asian giant’s GDP, and even at that, there’s always suspicion about the reliability of its official indicators.  

Besides China, markets should today begin to focus on the outlook to a monetary policy gear change in the United States. The tsunami that washed over financial markets in the last few days has certainly dented hopes of a hike and expectations of a US interest rate increase in September have wilted to a mere 20% probability from 50% a week ago.

Ahead of the Fed’s crunch policy-setting meeting in September, the immediate agenda holds the annual Jackson Hole jamboree where politicians and central bankers will meet and mingle and share their thoughts on how best to handle the fortunes of the world’s largest economy. Keep an eye on that. (August 27-29).

Market signals

Asian session

  • The battered Shanghai Composite opened 0.46% higher on the back of the PBoC easing
  • The Shanghai Composite was up 2.75% to 3,046.48 (at 0536 GMT)
  • Optimism in China spread to Hong Kong and other markets
  • The Hang Seng was up 0.39% to 21,487.56 (at 0543 GMT)
  • Shares edged higher in Tokyo before an early afternoon surge
  • The benchmark Nikkei 225 was up 3.46% to 18,422.90 (at 0519 GMT)
  • The ASX opened lower after yesterday's bounce, before rallying later in the session
  • The S&P/ASX200 was up 0.69% to 5,172.70 points (at 0533 GMT)
  • BHP Billiton's dividend yield has hit a record level, despite the miner's profit tumble

Forex ahead

  • USDJPY chops about, tracking Nikkei gyrations
  • EURUSD should ease back if equity unrest quells
  • Eurodollar would gain on extended equity woes 
  • USDJPY jammed in tight 118.45–119.51 range
  • USDCHF logs mild gain in Asian trade

From the Floor

Poker face. ”The PBoC is trying to convince the market it is on top of matters but the market is losing confidence,” says Moltke-Leth

Broken links. “Equities are falling but it’s scary that bonds are not rising accordingly,” says Garnry

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

1.. 2..3
The CBI distributive trades survey will stress test the case for a firmer outlook for UK retail growth, writes James Picerno.

Market bites back

Beijing discovered that the markets rule, and hasty bargain hunters took a hit after US stocks gave up gains and headed into negative territory on Tuesday, writes Stephen Pope.

Pair under pressure
Shanghai Composite index weakness and falling ore prices will continue to put downward pressure on the AUDUSD, says the team at Saxo Captial Markets Australia.   

A touch too much
Volatility is a good thing, says the Saxo APAC sales trading team, until it gets to a completely dislocated market, like we have now in forex and equities markets. 

Fischer FX fallout
Forex markets are certain to react if Fed heavyweight Stanley Fischer comes down on either side of the rate rise question in his speech this weekend, says Max McKegg.

Bounce back, Wall Street
Kay Van-Petersen was disappointed by Tuesday's fall in US stocks, but he's still mildly bullish, and believes a strong close on Wall Street could clear away the gloom from global markets. 

Get smart on cars
Investors would be wise to monitor the smart car business in China, as tech giants are investing heavily in the industry, and Aston Martin-LeTV is in pole position, says Neil Flynn.


china


As ordinary Chinese worry about lost savings, premier Li Keqiang is fighting to save his job. Photo: iStock

Morning Markets goes out on the TradingFloor platform at 07:00 GMT, Monday to Friday.
Click here
to make sure you're up to date with the latest developments.

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Tradingfloor.com permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Tradingfloor.com and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Tradingfloor.com is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Tradingfloor.com or as a result of the use of the Tradingfloor.com. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through Tradingfloor.com your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. Tradingfloor.com does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail