- Euro, yen surge as risk aversion intensifies; dollar takes a hit.
- EUR/USD hit 6-1/2 month high at 1.1500 levels.
- USD/JPY hit lows at 120.25 levels.
- CAD$ extends losses above C$1.3250 vs dollar, trading at 2004 lows on falling oil price.
- Dollar index fell 0.7%, lowest in 2 months at 94.113 levels.
- Sterling slides as stocks rout cools BOE rate hike expectations.
- EUR/GBP rallied to 0.7337 before easing back to the figure.
- SSEC closed down 8.5% at 3,209.91 points, biggest one day fall since 2007.
- DAX down 3%, now below 10.000 for the 1st time since January.
- USD/ZAR stormed to 14.00, up near 8% from its session low.
- Brent hits 44.00, new 2015 lows and a level not seen since March 2009.
- China top planning agency says downward pressure on economy becomes more obvious.
- (0830 ET/1230 GMT) US July Chicago Fed national activity index; last 0.08.
Key Events Ahead
- (1145 ET/1545 GMT) Fed Trade operation 30-year Ginnie Mae (max $1.075 bn).
- (1400 ET/1800 GMT) Fed releases Discount Rate Meeting Minutes.
- (1555 ET/1955 GMT) FRB Atlanta's Lockhart (voter, moderate) on "Pensions and Economy"; Berkeley, CA.
FX Recap
EUR/USD is supported below 1.1500 levels and currently trading at 1.1488 levels. It has made intraday high at 1.1500 and low at 1.1369 levels. US dollar was broadly weaker as fears about a slowdown in the Chinese and global economies intensified risk-off sentiment in the markets. Euro hit a 6 1/2-month high and the yen struck a 1 1/2-month peak against the dollar on Monday as investors flocked to safe haven currencies. The euro jumped to $1.1499, its highest level since Feb and last stood at $1.1489 ,with its sustained rise in the past few weeks likely to cause much unease within the European Central Bank. The euro continues to extend gains across the board, trading near three-month highs versus the pound, as risk-off sentiment and the lowest oil prices since 2009 threaten the UK's mining and energy sector, while the fading chances of a September rate hike by the Fed also puts pressure on the BoE. Stock markets in China has been in free fall recently after the latest news signalled the Chinese economy is slowing, raising worries over the health of the world's no.2 economy. Initial support is seen around at 1.1308 and resistance at 1.1526 levels. Option expiry is at 1.1325 (227M).
USD/JPY is supported around 120.00 levels and posted a high of 122.02 levels. It has made intraday low at 120.05 and currently trading at 120.17 levels. Speaking in the Japanese Parliament on Monday, Japan's Prime Minister Shinzo Abe said that he has full confidence in Bank of Japan (BoJ) Governor Haruhiko Kuroda's handling of monetary policy. Therefore, it is acceptable for the central bank to delay its self-imposed deadline for meeting its inflation target of just below 2% within two years. Abe expressed confidence that Japan's economy remained on a solid recovery path, adding that with oil prices continuing to decline, the BOJ missing the two-year deadline could not be helped. Initial resistance is seen at 123.20 and support is seen at 120.02 levels. Option expiries are at 121.50 (380M), 122.00 (666M), 123.00 (1BLN).
GBP/USD is supported above $1.5700 levels. It made an intraday high at 1.5727 and low at 1.5631 levels. Pair is currently trading at 1.5710 levels. Sterling slipped against the dollar as steep fall in global stock markets cooled BoE rate hike expectations. Cable traded 0.25 percent down in early trading Monday at $1.5660, dragging down BoE's trade-weighted sterling index to 93.40. The pound was weakest against the euro, which was up 1 percent on the day. However, falling oil prices continue to weigh on UK's mining and energy sector, keeping the upside in GBP/USD restricted. While markets completely shrugged off upbeat growth forecasts by CBI on the UK economy. Initial support is seen at 1.5413 and resistance is seen around 1.5734 levels.
NZDUSD is supported below 0.6600 levels and trading at 0.6557 levels and made intraday low at 0.6550 and high at 0.6686 levels. A weak consumer confidence index reading for August and a soft rise in job ads last month did little to weigh down the so-called kiwi on last week. Looking ahead market will eye on New Zealand's Inflation expectations data due for release tomorrow for the further directions. Initial support is seen at 0.6465 and resistance at 0.6789 levels.
AUD/USD is supported below 0.7300 levels and trading at 0.7212 levels. It has made intraday high at 0.7310 levels and low at 0.7199 levels. Disappointing manufacturing indicators in China and the latest plunge in Chinese stocks drove volatility in the currency markets on Monday. Emerging market currencies were weaker, with AUD and NZD the biggest losers, while the EUR and JPY outperformed. The Australian dollar fell more than 1% to its fresh 2009 low due to the accelerated risk aversion spurred mainly by sharp declines in Chinese equities and underscored by much weaker-than-expected Chinese manufacturing data. Initial support is seen at 0.7178 and resistance at 0.7647 levels.
Equity Recap
Fears of China-led global economic slowdown saw investors barrel out of riskier assets like stocks. Chinese stocks slumped near 9 pct, their worst performance since the global financial crisis in 2009. MSCI's broadest index of Asia-Pacific shares outside Japan fell 5.1 percent to a three-year low. Tokyo's Nikkei was down 4.1 percent and Australian and Indonesian shares hit two-year troughs.
The pan-European FTSEurofirst 300, down 3.1 percent by 0830 GMT at 1,382.15 points, wiping around 260 billion euros ($298.61 billion) off the index and taking its losses for the month to more that 1 trillion euros.
U.S. stock futures also pointed to larger losses for Wall Street's main markets, with the S&P 500, Dow Jones Industrial and Nasdaq expected to open 1.8, 2.2 and 3.1 percent lower, respectively.
Treasury Recap
UK Gilts opened 56 ticks higher than the settlement of 119.15 as equities suffered on continued China growth concerns. Buyers have posed a brief test of April highs around the 1.64% region on 10-year cash yields. Friday's lows will act as resistance at 1.696%.
German Bund yields fell to near 3-month lows as investors took cover in Europe's benchmark German bonds, sending 10-year yields down 5 basis points to touch 0.53 percent in the early trades, the lowest since June 1.
Yields on lower-rated bonds from the Euro bloc's southern periphery suffered. Greece, Portugal, Italy and Spain all saw their 10-year yields rise 4-6 basis points on the day to 9.89 percent, 2.70 percent, 1.91 percent and 2.06 percent, respectively.
JGBs remain in narrow range despite another plunge in Tokyo stocks. 10-yr was flat at 0.35% (0.35%-0.355%); 2-yr was flat at zero. 10-yr Sept JGB futures: +0.03 at 148.09 (147.97-148.15).
New Zealand government bonds edged up, pushing yields as much as 3 basis points lower across the curve. Australian government bond futures rallied to four-month highs, with the three-year bond contract up 6 ticks to 98.250. The 10-year contract added 5 ticks to 97.4300.
Commodity Recap
Oil prices hit 6-1/2-year lows. U.S. crude was down 3 percent at $39.20 a barrel while Brent lost 2.4 percent to $44.40 a barrel. U.S. crude is now almost 17 percent below its opening price at the start of the month and Brent is down more than 10 percent.
Gold edged down, but stayed close to its highest level in almost seven weeks on Monday. Spot gold was down 0.6 percent at $1,153.20 an ounce by 0638 GMT, coming off the day's peak of $1,165.11. U.S. gold for December delivery slipped 0.5 percent to $1,153.80 an ounce.
