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Equity sell-off accelerates on Chinese concerns

Arnaud Masset

Market Brief

G10 Advancers and Decliners vs USD
NZD 0.90
NOK 0.37
DKK 0.34
EUR 0.33
CAD 0.28
SEK 0.25
CHF 0.22
GBP 0.21
JPY 0.08
AUD -0.06
Global Indexes Current Level % Change
Nikkei 225 Index 17891 -1.89
Hang Seng Index 22466.84 -0.59
Shanghai Index 3276.112 -0.52
FTSE futures 6259.5 -0.84
DAX futures 9950 -0.69
SMI Futures 8586 -0.76
S&P future 1992.7 -0.06
Global Indexes Current Level % Change
Gold 1172.22 0.29
Silver 15.99 0.46
VIX 17.67 9.28
Crude wti 46.67 0.02
USD Index 94.64 -0.12

The ZEW survey was a massive disappointment for Germany yesterday. The current situation index fell to 55.2 from 67.5, well below market expectations of 64. The ZEW expectation dropped to 1.9 from 12.1, also well below market expectations of 6.5 as the VW scandal and global growth concerns worsen the economic outlook. As a result, German shares spent most of the trading session under pressure - the DAX fell 0.86%. EUR/USD had a choppy session but was unable to choose a direction as news from the other side of the Atlantic failed to provide support to the greenback. US Fed Governor Tarullo said yesterday that he does not expect a rate hike before the end of the year and added that the Fed should wait for “tangible evidence” of a pick-up in inflation before considering raising rates.

The pound sterling suffered another sell-off yesterday and moved back below zero. Headline inflation printed at -0.1%y/y, below the median forecast and previous reading of 0.00%. Core inflation also surprised to the downside as it remained stable at 1%y/y in the month of September. GBP/USD dropped more than 1% to 1.5230 after the release. The cable remained in its declining channel and is getting closer to the support standing at 1.5108. We remain bearish on the pound sterling and expect further weakness, especially against the euro as the monetary union shows slightly more encouraging data. EUR/GBP is gaining positive momentum and is currently testing the 0.7483 resistance level implied by the high from May 7th).

In Australia, the better-than-expected Westpac Consumer index - printing at 4.2%m/m (s.a.) versus -5.6% in September - offered some respite to the AUD, which has fallen as much as 2.50% over the past 2 days against the US dollar. The Aussie is now taking a breather around $0.72.

In Asia this morning, the sell-off accelerates amid a disappointing inflation report from China. Headline CPI indicated that consumer prices rose 1.6%y/y in September, while economists were anticipating a reading of 1.8%. Meanwhile, producer prices dropped -5.9%y/y, matching expectations and previous reading. Japanese equities were pairing the biggest losses with the Nikkei and the Topix index down -1.89% and -2.15%, respectively. In the rest of Asia, the sell-off was less extreme with the Hang Seng sliding -0.59%, the S&P/ASX -0.11% and the Kospi index -0.47%. The negative mood is already spreading to European markets as futures are all turning red. Footsie is down -0.84%, DAX -0.69%, SMI -0.76%, while the European gauge, the Euro Stroxx 600 falls -0.70%.

Today traders will be watching inflation reports from Spain and Italy; the job report from the UK; industrial production from the euro zone; retail sales from Brazil and the US; PPI from the US.

 

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Today's Calendar Estimates Previous Country / GMT
TU Aug Current Account Balance 0.00b -3.15b TRY / 07:00
SP Sep F CPI EU Harmonised MoM 0.40% 0.40% EUR / 07:00
SP Sep F CPI EU Harmonised YoY -1.20% -1.20% EUR / 07:00
SP Sep F CPI MoM -0.30% -0.30% EUR / 07:00
SP Sep F CPI YoY -0.90% -0.90% EUR / 07:00
SP Sep CPI Core MoM - 0.10% EUR / 07:00
SP Sep CPI Core YoY 0.80% 0.70% EUR / 07:00
IT Sep CPI FOI Index Ex Tobacco - 107.4 EUR / 08:00
IT Sep F CPI EU Harmonized YoY 0.20% 0.20% EUR / 08:00
IT Aug General Government Debt - 2199.2b EUR / 08:30
UK Sep Claimant Count Rate 2.30% 2.30% GBP / 08:30
UK Sep Jobless Claims Change -2.2k 1.2k GBP / 08:30
UK Aug Average Weekly Earnings 3M/YoY 3.10% 2.90% GBP / 08:30
UK Aug Weekly Earnings ex Bonus 3M/YoY 3.00% 2.90% GBP / 08:30
UK Aug ILO Unemployment Rate 3Mths 5.50% 5.50% GBP / 08:30
UK Aug Employment Change 3M/3M 140k 42k GBP / 08:30
EC Aug Industrial Production SA MoM -0.50% 0.60% EUR / 09:00
EC Aug Industrial Production WDA YoY 1.80% 1.90% EUR / 09:00
SZ Oct Credit Suisse ZEW Survey Expectations - 9.7 CHF / 09:00
US oct..09 MBA Mortgage Applications - 25.50% USD / 11:00
BZ Aug Retail Sales MoM -0.60% -1.00% BRL / 12:00
BZ Aug Retail Sales YoY -5.80% -3.50% BRL / 12:00
BZ Aug Retail Sales Broad MoM -1.50% 0.60% BRL / 12:00
BZ Aug Retail Sales Broad YoY -8.60% -6.80% BRL / 12:00
US Sep Retail Sales Advance MoM 0.20% 0.20% USD / 12:30
US Sep Retail Sales Ex Auto MoM -0.10% 0.10% USD / 12:30
US Sep Retail Sales Ex Auto and Gas 0.30% 0.30% USD / 12:30
US Sep Retail Sales Control Group 0.30% 0.40% USD / 12:30
US Sep PPI Final Demand MoM -0.20% 0.00% USD / 12:30
US Sep PPI Ex Food and Energy MoM 0.10% 0.30% USD / 12:30
US Sep PPI Ex Food, Energy, Trade MoM 0.10% 0.10% USD / 12:30
US Sep PPI Final Demand YoY -0.80% -0.80% USD / 12:30
US Sep PPI Ex Food and Energy YoY 1.20% 0.90% USD / 12:30
US Sep PPI Ex Food, Energy, Trade YoY 0.80% 0.70% USD / 12:30
US Aug Business Inventories 0.10% 0.10% USD / 14:00
BZ Currency Flows Weekly - - BRL / 15:30
US U.S. Federal Reserve Releases Beige Book - - USD / 18:00
NZ Sep BusinessNZ Manufacturing PMI - 55 NZD / 21:30
CH Sep New Yuan Loans CNY 900.0b 809.6b CNY / 22:00
CH Sep Money Supply M2 YoY 13.10% 13.30% CNY / 22:00
CH Sep Aggregate Financing CNY 1200.0b 1080.0b CNY / 22:00
CH Sep Money Supply M1 YoY 9.80% 9.30% CNY / 22:00
CH Sep Money Supply M0 YoY 3.00% 1.80% CNY / 22:00
US Sep Monthly Budget Statement $95.0b $105.8b USD / 22:00
BZ Sep Formal Job Creation Total -59564 -86543 BRL / 22:00
Currency Tech
EURUSD
R 2: 1.1561
R 1: 1.1460
CURRENT: 1.1418
S 1: 1.1106
S 2: 1.1017

GBPUSD
R 2: 1.5659
R 1: 1.5383
CURRENT: 1.5278
S 1: 1.5089
S 2: 1.4960

USDJPY
R 2: 125.86
R 1: 121.75
CURRENT: 119.62
S 1: 118.61
S 2: 116.18

USDCHF
R 2: 1.0240
R 1: 0.9903
CURRENT: 0.9556
S 1: 0.9513
S 2: 0.9259
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