¿Corrección a la vista?

Una linda mañanita para los mercados del mundo. Pánico. Nueva York no abrió todavía. Algunos dicen que esto recién empieza. La nota que sigue es de Zero Hedge:


Título: "It's Just Beginning": US Futures Plunge As Global Rout Hammers Asia, Europe

Texto: It is a sea of blood red this October morning as the biggest market rout since February and the longest selloff of the Trump administration triggered a surge of global selling from the U.S. through Asia and spreading to Europe on Thursday, with markets from Tokyo to London slumping amid fresh fears the decade-old bull market may be coming to an end.

“Equity markets are locked in a sharp sell-off, with concern around how far yields will rise, warnings from the IMF about financial stability risks and continued trade tension all driving uncertainty,” summed up analysts at ANZ.

The sell-off that started in the U.S. ripped across Asian stock markets Thursday, with indexes in Japan, Hong Kong and China all tumbling.

All but one stock listed on Japan’s Nikkei 225 Stock Average retreated, while the country’s Topix index posted its steepest decline since March losing around $207 billion in market value, falling 3.5%. China’s Shanghai Composite sank 5.2%, its biggest drop since February 2016 to close at its lowest since November 2014, while the Hang Seng Index lost 3.5%. Taiwan’s Taiex index led the rout with a 6.3% slump.

The MSCI Asia Pacific Index had its worst day since June 2016, when the U.K. voted to leave the EU, with the index plunging 3.5% and closing in on entering a bear market.

Turbulence spiked in Asian markets as the Nikkei Stock Average Volatility Index surged 44%. The MSCI Asia Pacific Index ex Japan closed down 3.6%, hitting its lowest level since March 2017. China’s main indexes had slumped over 5 percent

The Asian regional benchmark gauge has slumped 13 percent this year as uncertainties such as the U.S.-China trade war weigh on investor sentiment. The Shanghai Composite Index has lost 22 percent in 2018, while Japan’s Topix is down 6.4 percent.

"It’s just a beginning," said Banny Lam, head of research at CEB International Investment. "The U.S. tech bubble may take a while to burst and we are facing many external uncertainties - trade wars, risks in emerging markets currencies and oil price. And people should also watch yuan closely."

"Asia is like a leveraged play on the U.S. market and the global trade situation right now, that’s not going to change until a deal is reached between the two largest economies in the world,” said Olivier d’Assier, head of applied research for the Asia-Pacific region at Axioma. For emerging markets, “the trifecta of a falling U.S. market, higher U.S. interest rates, and a stronger dollar is a deadly combination so they are likely to remain under pressure.”

The Asian rout then spread to Europe, where stocks slumped to a more than an 18-month low. Losses in London, Paris and Milan were already climbing toward 2% in early trading, although the selloff wasn't quite as dramatic as the overnight session in Asia. Italian equities entered a bear market, however, on ongoing budget concerns and LeasePlan Group NV pulled a planned IPO.

As a result of the global rout, MSCI’s 24-country emerging market index was having its worst day since early 2016, after Wall Street’s swoon had given the 47-country world index equivalent its worst day since February.

Meanwhile, in a surprising reversal from previous routs, US futures failed to rebound as dip buyers stayed away from the E-Mini. S&P futures extended losses from Wednesday, when the Nasdaq 100 Index plunged more than 4% for its worst day in seven years.

The futures drop took place after the S&P500’s sharpest one-day fall since February wiped out around $850 billion of wealth as technology shares tumbled on fears of slowing demand. The S&P 500 ended Wednesday with down 3.29%, wiping out nearly half the year's gains in one session; the Nasdaq Composite plunged 4.08% and the Dow 2.2%.

"The latest drop is reminiscent of February’s selling, which saw its recovery assisted by positive earnings results," said Jingyi Pan, a market strategist at IG Asia Pte. “As for the upcoming earnings season commencing with major U.S. banks on Friday, the outlook is rather mixed thus adding to the uncertainty. It will be one worth watching for aid to the market given the proximity and it will be difficult to rule out further decline in the market absent positive factors.”

Investors seeking to isolate the cause of the current rout in equities have no shortage of culprits: U.S companies are increasingly fretting the impact of the burgeoning trade war, while the same concern prompted the IMF to dial down global growth expectations for the first time in 2 years. In the tech sector, which was a key driver of the rally that pushed American equities to a record just a month ago, expensive-looking companies have been roiled by a hacking scandal.

At the same time, the Federal Reserve has been trimming its balance sheet and raising interest rates which as "well below" the neutral rate of interest according to Powell, which in turn provoked the ire of President Donald Trump and helping force a repricing of riskier assets. Trump, who has claimed credit for record U.S. stock levels, said after the market closed on Wednesday that the Fed is "loco", that it is making a “mistake” and “has gone crazy.”

Commenting on the recent move, Saxo Capital strategist Eleanor Creagh said that "the sharp rise in U.S. 10-year yields has caused investors to suddenly reprice the impact of moving from post-crisis low yields to a rising rate environment. We have the global growth engines, price of energy rising, price of money rising and quantity of money falling combined with the ongoing trend of de-globalization which has started to impact markets and the cracks are showing.”

Curiously, Treasuries which helped trigger the stock selloff when 10-year yields hit the highest since 2011, nudged higher after jumping on Wednesday as bonds have once again become a safe haven. It meant that as equities were caught in a global carnage, US Treasurys were oddly calm, with the 10Y generally unchanged overnight.

“The rise in Treasury yields has been the primary catalyst for the sell-off in equities, since higher yields suggest a lower present value of future dividend streams, assuming an unchanged economic outlook,” said Steven Friedman, senior economist at BNP Paribas Asset Management. “It is also possible that equity investors are growing concerned that the Federal Reserve’s projected rate path will choke off the expansion.”

Meanwhile, Italian bonds sold off again as Deputy Premier Matteo Salvini once again said the populist government will stick with its budget plan and that rating agencies "won't make us change our minds", though the country successfully sold new debt. Asked about possible downgrade by ratings agencies and concerns about spread with German bunds, Salvini said "we’ve already seen this movie in the past, it’s forced Italians to make incredible sacrifices, to have cuts on schools and reforms on health and pensions which impoverished,” adds “we will do exactly the opposite.”

“It remains to be seen whether the accelerating equity plunge is a healthy correction or the tip of the iceberg,” Commerzbank analysts said in a note. “For sure it creates a more challenging environment for today’s (Italian) auctions.”

Meanwhile, bunds and gilts led advances amid the broader risk-off mood.

The shift in yields is also sucking funds out of emerging markets, putting particular pressure on the Chinese yuan as Beijing fights a protracted trade battle with the United States. China's central bank has been allowing the yuan to gradually decline, breaking the 6.9000 barrier and allowing traders to push the dollar up to 6.9431.

China’s move has forced other emerging-market currencies to weaken to stay competitive and drawn the ire of the United States, which sees it as an unfair devaluation. “The yuan has already weakened significantly, to offset the tariffs announced so far,” said Alan Ruskin, Deutsche’s global head of G10 FX strategy. “Further weakness could exacerbate concerns of a self-fulfilling flight of capital and a loss of control.”

Still, there was little sign of panic in currencies, where the euro gained and dollar weakened versus most of its major counterparts. The Swedish krona was the standout gainer, jumping after inflation data. The Turkish lira and rand rallied, but emerging currencies overall edged lower. The euro was at $1.1550 up from a low of $1.1429 early in the week. The dollar lapsed to 112.14 yen, a retreat from last week's 114.54 peak. That left the dollar at 95.263 against a basket of currencies

Sinking global shares have raised the stakes for U.S. inflation figures due later on Thursday. High inflation would only stoke speculation of more aggressive rate hikes from the Federal Reserve.

In commodity markets, gold struggled to get any safety bid and edged down to $1,192.77. Oil prices skidded in line with U.S. equity markets, even though energy traders worried about shrinking Iranian supply from U.S. sanctions and kept an eye on Hurricane Michael, which shut down some U.S. Gulf of Mexico oil output. Brent crude fell 1.6 percent to $81.75 a barrel. U.S. crude dropped 1.5 percent to $72.07. A Bloomberg index of cryptocurrencies dropped as much as 11%.

Scheduled earnings include Walgreens and Delta Air Lines. CPI figures, jobless claims are among economic data due.

Finally, one wonders just what is it about October, when half of the biggest US market crashes have taken place.



Market Snapshot

&P 500 futures down 1% to 2,753.75
STOXX Europe 600 down 1.4% to 361.75
MXAP down 3.5% to 151.91
MXAPJ down 3.7% to 473.27
Nikkei down 3.9% to 22,590.86
Topix down 3.5% to 1,701.86
Hang Seng Index down 3.5% to 25,266.37
Shanghai Composite down 5.2% to 2,583.46
Sensex down 1.6% to 34,218.05
Australia S&P/ASX 200 down 2.7% to 5,883.76
Kospi down 4.4% to 2,129.67
German 10Y yield fell 3.9 bps to 0.513%
Euro up 0.2% to $1.1547
Brent Futures down 1.1% to $82.16/bbl
Italian 10Y yield rose 2.9 bps to 3.133%
Spanish 10Y yield rose 1.2 bps to 1.625%
Brent Futures down 1.1% to $82.16/bbl
Gold spot up 0.2% to $1,197.28
U.S. Dollar Index down 0.2% to 95.33
Top Overnight News from Bloomberg

The biggest stock sell-off since February rolled from the U.S. through Asia on Thursday, with benchmarks from Tokyo to Hong Kong seeing declines in excess of 3 percent. Some emerging- market currencies also came under pressure, with the won hitting a one-year low
A sell off in Hong Kong and Chinese shares deepened following a slump in U.S. equities amid concerns about a trade war

President Donald Trump slammed the Federal Reserve as “going loco” for its interest-rate increases this year. His latest criticism of the Fed began earlier Wednesday. “They’re so tight. I think the Fed has gone crazy,” the president said

Wall Street is bracing for the prospect that the U.S. uses this month’s semiannual foreign-exchange report to label China a currency manipulator. IMF Managing Director Christine Lagarde says yuan weakness has a lot to do with dollar strength

Brexit negotiators are edging toward a compromise on the thorniest issue in talks. The main sticking point is how to keep the Irish border open after Brexit

Asian stocks drowned in a sea of red following the battered lead from Wall St. amid a sell-off in tech stocks where the sector posted its worst day since 2011. Dow and S&P notched their biggest one-day drop since early February, while Nasdaq fell below its 200 DMA to experience its largest single-day decline since June 2016. ASX 200 (-2.5%) was dragged lower by the tech sector, closely followed by the energy names, while Nikkei 225 (-4.0%) plumbed the depths amid weakness in mining and energy names alongside currency effects. Elsewhere, Hang Seng (-3.7%) and Shanghai Comp. (-4.3%) dived deeper into bear-market territory in a continuation of the tech sell-off, with the former hitting lows last seen in February while the latter tumbled to 4-year lows.


Top Asian News

India’s Sensex on Verge of Losing Yearly Gain Amid Global Rout
Wave of Reforms Coming as Indonesia Confronts Weak Currency
China Urges U.S. to Address Trade Differences by Talks
IMF Says Pakistan Has Formally Requested Financial Assistance

Major European indices are all in the red due to the global market turmoil which began on Wednesday in U.S markets (Euro Stoxx 50: -1.3%), the cause has been quoted as a multitude of factors not limited to; US-China trade tensions, the current yield environment, the Italian political situation and suggestions that the markets were overdue a correction. 

However, it is yet to be seen whether this is part of a broader economic downturn as we enter into U.S earning season with a relatively solid U.S economic backdrop. All sectors are down with energy firms down by over 2% in fitting with price action in the complex. 

Healthcare and consumer staples are the best performing sectors as more defensive investments are sought in the risk-off environment, but are both in the red by just under 1% 


Dialog Semiconductor is vastly outperforming, up over 23%, following a EUR 600mln deal with Apple, which has led to the company updating their revenue outlook for the next 4 years. Ingenico are also up over 12% after confirmation that Natixis (-4.5%) are in the early stages of take over discussions. Hays Plc are at the bottom of the Stoxx 600, down by 12% after reporting a slower quarterly growth rate.


Top European News

London Housing Is Taking a Beating From From Brexit Uncertainty
Russia Targets 25% Global Energy Market Share: La Stampa
Merlin Says Report on El Corte Ingles Talks ‘Unfounded’
Semis Are Worst Hit as Tech Stock Sell-off Extends in Europe
Italy’s FTSE MIB Is Set to Enter Bear Market on Budget Concerns
In FX, the EUR is firmly back above 1.1500 vs the Usd and pivoting 1.1550 within a higher range flanked by hefty option expiry interest (1.8 bn at the 1.1500 strike and 2.3 bn from 1.1600-20), while also facing chart resistance in the 1.1572-91 region that houses a daily top, 55 DMA and Fib. Fundamentally, not much to glean from latest ECB comments, but the minutes may provide something to trade off. In EM, the Lira stands out amidst broad rebounds vs the Dollar across the region as Usd/Try crosses the 6.0000 handle to the downside on a combination of more concerted efforts to get runaway Turkish inflation back down towards target and a wider than forecast current account surplus. Elsewhere, the Rand and Real also have data to digest in the form of SA manufacturing production and Brazilian retail sales that might deflect some attention away from domestic politics, for a while at least. SEK - Hot on the heels of its Scandi peer, the Sek has seized pole position on the G10 grid and extended gains on the back of relatively hawkish Riksbank rhetoric, as Swedish CPI and CPIF readings also topped market expectations. In response, December rate hike odds have narrowed to better than evens, while Eur/Sek is testing psychological support circa 10.4000 ahead of the nearest downside tech level around 10.3725 (early October low)

In commodities, both WTI and Brent are down by 2% at just under USD 72/bbl and USD 82/bbl respectively with prices hampered by the risk-off environment as investors are concerned following global growth uncertainty and ongoing trade disputes. This comes alongside API’s reporting a larger than expected headline build of +9.75mln offering pressure on the fossil fuel. Supply concerns from Hurricane Michael are also easing as oil assets were likely spared significant damage from the storm. Gold is up 0.3% as investors seek safe havens from the current global dip, gold has subsequently breached USD 1200/oz to the upside. Base metals also fell again amidst the broader global risk sentiment with underperformance seen in copper.


US Event Calendar

8:30am: US CPI MoM, est. 0.2%, prior 0.2%; CPI Ex Food and Energy MoM, est. 0.2%, prior 0.1%
8:30am: US CPI YoY, est. 2.4%, prior 2.7%; CPI Ex Food and Energy YoY, est. 2.3%, prior 2.2%
8:30am: Real Avg Weekly Earnings YoY, prior 0.52%; Real Avg Hourly Earning YoY, prior 0.2%
8:30am: Initial Jobless Claims, est. 206,500, prior 207,000; Continuing Claims, est. 1.66m, prior 1.65m
9:45am: Bloomberg Consumer Comfort, prior 61.6
DB's Jim Reid concludes the overnight wrap

Days like yesterday, although brutal, restore one’s belief that at this stage of the rate cycle things should start to get more difficult and more volatile even if the center (the US economy) is still likely to hold for now. In fact it’s been our thesis that the US economy at risk of overheating is partly what’s going to drive volatility up. So with that in mind today’s US CPI comes at a fascinating point.

Before reviewing that let’s review the wreckage from yesterday. The S&P 500 (-3.28%) and DOW (-3.15%) both had their worst days since the February market correction and the NASDAQ (-4.08%) shed the most since June 2016. The S&P 500 has now traded lower for 5 consecutive sessions, shedding -4.77% over that period, its longest such stretch since March.

Every S&P 500 sub-sector traded lower amid generalised risk-off sentiment, but the FANGs (-5.60%) continued to underperform, saw their worst day since March and are now down -17.86% from their June peak. Volatility spiked, with the VIX index up 7.01pts and closing at its highs around 22.96, a six-month high. Using another measure of vol, this year we’ve now had 6 days with the S&P 500 falling more than 2% - the most since 2011. 2017 had none. Perhaps tellingly, Treasuries yields were higher all day until a mini plunge started with 10 minutes left of US equity trading. They traded around -4.3bps lower for the day at 3.164% at the close. In Asia overnight they are at 3.147% as we type. US HY had been the most expensive part of the credit spectrum in our view and was at 9 month tights 2 weeks ago but has been selling off of late. CDX HY widened 18.1bps yesterday and is now around 46.7bps wider than the late September tights and back nearer the top end of the YTD range.

On the equity sell off the big names in the US administration had their say. US Treasury Secretary Steven Mnuchin said, “the fundamentals of the U.S. economy continue to be extremely strong, I think that’s why the stock market has performed as well as it has. The fact that there’s somewhat of a correction given how much the market has gone up is not particularly surprising” while President Trump also said that the stocks decline was “a correction that we’ve been waiting for for a long time.” However, Trump stepped up his rhetoric on Fed saying that it is making a “mistake” by raising rates and “has gone crazy” while adding that yesterday’s market plunge wasn’t because of the US trade war with China.

This morning in Asia, the risk off sentiment has continued from Wall Street with all equity indices trading in sea of red and bumping around the lows for the session as we type. The Nikkei (-4.28%), Hang Seng (-3.74%), Shanghai Comp (-4.34%), ASX (-2.40%) and Kospi (-3.61%) are all down but in these fast markets things might have changed again by the time you read this. In other markets, Taiwan’s Taiex (-6.23%), India’s Nifty (-2.78%) and Indonesia’s Jakarta Comp (-1.67%) are all heading lower. Elsewhere, futures on S&P 500 are down another -0.66%. Overnight, BoJ board member Makoto Sakurai called for the central bank to assess the sustainability of its easing policy from a much wider perspective indicating that the policy tweaks in July haven’t put to bed concerns over side effects. She said that the BoJ needed to keep in mind the risk of distortions building up in the economy and the financial sector if the easing policy is prolonged in a favorable economic environment with demand exceeding supply.

Today will be a key test for markets with US CPI set to dominate attention. The consensus doesn’t expect much to happen, but then again it rarely has for this data print over the last few years. The consensus forecast is again at +0.2% mom for the core for the 36th successive month. DB is at +0.25% mom so we think it could round up to 0.3%. Before the recent risk-off, I would have automatically said that the downside risks to the market from an upside inflation print were much larger than the upside market risks from a downside surprise. However, given the recent risk sell-off, you’d have to say that there is scope for a decent relief rally on a softer number. Medium-term though, signs of higher inflation would be much worse for risk than softer inflation would be positive.

Back to yesterday and in Europe a number of markets hit YTD lows with the DAX (-2.21%) at the lowest since February 2017 and experiencing the 5th worst day of the year. The Stoxx 600 (-1.61%) was at the lowest since March. The FTSEMIB (-1.71%) actually held in well relative to the market, though it did reach a fresh 20-month low. 10yr BTPs only rose 3.0bps and only slightly widened to Bunds (+0.5bps). The S&P fell -1.82% after Europe closed so there should be some additional catch up this morning.

On Italy, Moody’s chief economist, Mark Zandi said that it is logical that the market concerns about Italy will be reflected in ratings agencies’ upcoming reviews of the country. He added that the Italian government’s fiscal plan can be compared to gambling with the long-term fiscal and economic health of Italy. Elsewhere, Italian Deputy Premier Matteo Salvini said that he won’t go back on pension reform and tax cuts in budget plan while adding he is “absolutely sure” that the BTPs-bunds spread won’t reach 400bps. It’s hard to know how he can control for both of these. In the meantime Finance Minister Tria reiterated more of same at his parliament hearing saying “the rise in government bond yields recorded in the last few days is certainly a reason for concern, but I want to reiterate that it was an excessive reaction which is not justified by the fundamentals of Italy’s economy and public finances.”

On Brexit it was another eventful day. Media reports highlighted that the UK and EU officials engaged in talks indicated that the UK government is likely to back down on opposition to new regulatory checks on some items moving between the British mainland and Northern Ireland while, in exchange, the UK is seeking the EU to compromise and allow the whole of the UK, not just Northern Ireland, to stay in the bloc’s customs regime until a future trade deal is eventually drawn up between the two sides. The officials  indicated that the discussions over the next few days could lead to provisional agreement between the EU and the UK over the issue of the Irish backstop on Monday. The chief EU negotiator Michel Barnier confirmed this positive movement, saying "a deal is  within reach." Elsewhere, the UK Prime Minister Theresa May’s de-facto deputy, David Lidington, said in an interveiw that “we’ve got a fair way to go still. There are still differences between our position and that of the European Commission, but we’re working very hard to overcome them.”

Looking at the data releases from yesterday. In US, September PPI and core PPI both printed in line with consensus at +0.2% mom, rising for the first time in 3 months largely on the back of higher airfares (+5.5% mom; highest since 2009) and rail-transportation costs (+1.4% mom; highest since 2012). Overall, services prices increased +0.3% mom while the cost of goods fell -0.1% mom, reflecting declines in both food and energy. The core-core PPI stood at +0.4% mom (vs. +0.2% mom expected).

Across the pond in Europe, France’s August industrial production came in at +0.3% mom (vs. +0.1% mom expected) while the previous months was revised upwards to +0.8% mom from +0.7% mom and manufacturing production came in at +0.6% mom (vs. +0.1% mom expected). Industrial production also rose in Italy (+1.7% mom), Spain (+0.7%), and the Netherlands (+1.7%). These prints are likely distorted due to new regulations, but the trend signals healthy IP growth of around 1% for the euro area overall. In the UK, the August three month GDP change came in at +0.7% 3m/3m (vs. +0.6% 3m/3m expected) with August GDP remaining flat as against consensus of +0.1% mom. The UK’s August visible trade balance stood at -£11.2bn (vs.-£10.9bn expected) while the trade balance came in at -£1.3bn (vs. -£1.2bn expected). UK’s August industrial production came in at +0.2% mom (vs. +0.1% mom expected), manufacturing production at -0.2% mom (vs. +0.1% mom expected) and construction output at -0.7% mom (vs. -0.5% mom expected).

Before the US CPI print today, we'll get CPI revisions in France and Spain. Later this morning, the Bank of England will publish its latest credit conditions and bank liabilities survey. The ECB will publish the minutes of its September policy meeting this afternoon, while BoE Governor Carney will speak on a panel alongside Banque de France Governor Villeroy. Concurrent with the US CPI, the latest weekly jobless claims will print.