Article / 24 May 2016 at 7:00 GMT

Morning Markets: Asian contagion set to rattle Europe




  • Germany: ZEW Economic Sentiment Indicators (0900 GMT)
  • US: New Home Sales (1400 GMT)
  • US: Richmond Fed Manufacturing Index (1400 GMT) 
Gloom prevailed across much of Asia today and Europe looks set to follow through in similar vein as market participants worldwide await fresh clues from the US Federal Reserve on the timing of its next interest rate hike. The market has lately viewed June as an unlikely time for a Fed hike because of the proximity of the Brexit referendum on June 23, preferring July instead. However, opinions may well be revised in the wake of overnight comments by board member James Bullard who notably decoupled the British referendum from the central bank's decision-making process.

In Japan, the yen resumed its rise against the US dollar, fuelling negative sentiment and driving the Nikkei 225 into the red. Equities headed lower in Shanghai as well, wiping out recent modest gains. Korea's Kospi Composite and Hong Kong's Hang Seng both retreated as well. The contagious equity market gloom pushed shares lower in Australia as well. However India's benchmark S&P BSE Sensex was an exception, making modest gains.

Elsewhere, commodities, which were on a roll last week with the exception of copper, are trending weaker with crude oil and gold shedding recent gains. 

Market signals

Asian session

  • The rising yen weighed on share investor sentiment in Tokyo
  • The Nikkei 225 was down by a sharp 0.73% to 16,532.24 at 0445 GMT
  • China's Shanghai Composite was down by 0.89% to 2,818.42 at 0507 GMT
  • Hong Kong's Hang Seng was down 0.32% to 19,745.01 at 0513 GMT
  • Korea's Kospi Composite was down 0.61% to 1,943.36 at 0451 GMT
  • India's S&P BSE Sensex was up by a modest 0.07% to 25,247.07 at 0510 GMT
  • Australian sharemarket followed the lead in regional markets and headed lower
  • The S&P/ASX200 closed down 0.26% at 5,304.90
  • Iron ore to in China tumbled 5.4% to just $52.70/tonne
  • Iron ore futures suggest the price could fall as low as $50/tonne later today
  • Top miners BHP Billiton and Rio Tinto defied the ore price gloom with share price gains
  • Comments from RBA Governor Glenn Stevens impacted the Australian dollar

Forex ahead

  • The US dollar fell nearly 1% against the yen on Monday but was stable against the euro
  • The US dollar was worth just ¥109.3140 at 0514 GMT
  • The Aussie dollar fell on comments from the RBA governor and the iron ore price fall
  • The Aussie dollar was worth just 0.7197 at 0513GMT

From the Floor

Japan’s marker. “Aso defined a ‘disorderly’ market as a five-yen move in two days and that could lead to intervention,” says Moltke-Leth.

European banks. ”It’s a disastrous industry at the moment,” says Garnry.

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

In opinion


The Germans seem to believe that economic confidence is returning, which may turn out to be a self-fulfilling prophecy, says James Picerno.

Hawkish Fed
There have been more bullish speeches from the Fed favouring two rate hikes this year, writes the team at Saxo APAC Sales Trading.

Copper hammered
Hedge funds increased commodity bets by 3% to 1.15 million lots, a two-year high, during the week ending May 17. Net buying was seen across all sectors apart from metals due to a second week of aggressive copper selling, reports Ole Hansen.

This week's G7 meeting in Japan is a chance for industrial democracies to push for consensus on key issues like the environment, energy, health care and global growth. Photo: iStock

Morning Markets goes out on the TradingFloor platform at 0700 GMT, Monday to Friday.

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