Article / 24 August 2015 at 7:00 GMT

Morning Markets: Black Monday for crushed equities, oil

Former managing editor, TradingFloor.com / Saxo Bank
Denmark

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Watchlist

  • US: Chicago Fed National Activity Index (1230 GMT)
Hot topics: China, oil, equities, commodities, FTSE 100

There's no respite for equities after Asia plunged over the edge Monday led by a whopping 9% fall on the Shanghai Composite Index wiping out all of this year's gains on fears that China's problems are even more severe than originally feared. Some $5 trillion has been wiped off the value of global stocks since China devalued the yuan barely two weeks ago.

The SHCOMP was at 3,242.28 at 0635 GMT after hitting a day low of 3,191.88 for the biggest day fall since 2007.

Asia stocks overall were at three-year lows as panic gripped markets to send investors out of perceived riskier assets and towards safer-havens including the euro, the yen and bonds, the latter heading above 156 for risk-on averse German bunds. Gold was stable but unable to ride the risk-off wave.

Global oil benchmarks Brent and WTI crude smashed their way south of respective psychological barriers at $45/barrel and $40/b while copper lost another 2.5% as the Bloomberg Commodity Index fell a further 1.5% to head to its lowest close in 16 years.

Commodities currencies once again are taking the brunt led by South Africa's rand and Malaysia's ringit continued on its own one-way street to hit a fresh 17-year low. It was a similar story for Turkey's lira while both AUD and NZD were unable to gain any traction.

Where will this end? Nervous markets are already expecting to see the FTSE 100 below 6,000 today for the first time since 2012 and the DAX faces its own battle with 10,000. US equities are also slated to follow track and extend the bloodbath that has opened the floodgates and bust open the year ranges. Tin hats on.

Market signals

Asian session

  • At 0400 GMT the Shanghai Composite was down 296.55 points, or 8.9%, to 3,197.31
  • At 0300 GMT, AUD had dropped 1 US cent to 72.21, after earlier hitting low of 72.01.
  • At 0200 GMT, the S&P/ASX200 index was down 136.5 points, or 2.62% to 5078.1.
  • The plunge on the Chinese markets pushed the ASX to a two-year low at noon.
  • Indonesia's stock index fell 3% in early Monday trading, its lowest since January 2014.
  • South Africa's Rand hit a 14-year low to the USD.
  • Malaysia's Ringgit reached a 17-year low.

Forex ahead

  • EURUSD hit a six-and-half-month high and the JPY was also well up against the USD.
  • EURUSD moved up to $1.1496, while USD slid as far as JPY120.73.
  • EURUSD test of 115.00 area could break massive psychological barrier towards 120.00
  • USDJPY headed towards 120.00 on back of risk-off sentiment.
  • Commodities currencies all on the retreat on back of China concerns, selloff

From the Floor

China smashed. “It’s been a complete bloodbath in Asia – China shares have dropped the most since 2007,” says Thurai

Oil’s gone. “Crude oil falls below $40/b and the 2009 low at $32.40 is coming into focus,” says Hansen

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

In opinion

1, 2, 3...
A shortage of data today will intensify the focus on the Chicago Fed National Activity Index after the shocking selloff of US equities last week, writes James Picerno.

Transitory tumble
Some respected observers think the influence of falling prices for oil and other commodities on inflation is only “transitory”, but hard-nosed traders disagree, says Max McKegg.

Asian mayhem
The USD was sold off against all kinds of currencies last week, and gold is up. Meanwhile the mayhem in emerging markets continues, says Saxo's APAC team based in Singapore.

All fall down
With only 23 days before the FOMC meets on September 16, the USD squeeze can't last forever - but the longer-term macro outlook is not looking good, says Kay Van-Petersen.

Build it up
Swedish home builder Fabege could be headed for a bit of a bearish spell after peaking in April with a double top inviting the downside, says John Berntorp. [trade view]

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 There's nothing transitory about this fall in oil prices. Photo: iStock

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3y
Martin O'Rourke Martin O'Rourke
EURUSD is currently bang on the 1.1500 mark at 1211 GMT having earlier risen as high as 1.15417. Elsewhere, USDJPY has crashed through the 120.00 barrier to reside around the 119.80 area after falling as low as 119.553. The rouble is also tanking having hit 71.2861 earlier in the session and continues to hover close to 71.00 at 70.8889 at 1215 GMT. It just gets worse for oil too with WTI below $39/b and Brent well below $44/b.

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