Commodities, equity indices and emerging market currencies are seeing losses this morning in the wake of China's currency devaluation. Last night, the PBoC cut its daily reference rate by 1.9%, triggering the yuan's biggest one-day drop since China ended a dual-currency system in January 1994. Sovereign yields are dropping across the board as investors seek safe havens, with the 10-year UST yield down nine basis points to 2.139%. As of writing, the DJIA is down 1.20%, the S&P500 is off 0.93% and the Nasdaq is down 0.96%.
The dollar momentarily strengthened after the Chinese devaluation but turned right around to continue the weakening trend seen since August 5th. EUR/USD dropped momentarily from 1.1025 to around 1.0970 before moving higher, topping out earlier this morning around 1.1090. MXN and BRL have lost about 1% each, the RUB has been crushed, Malaysia's ringgit extended declines to a 1998 low, while KRW and TWD slid at least 1.3% each.
Crude futures are getting hit hard this morning by the OPEC monthly report, with the weaker dollar adding to the downside. Yesterday morning, the front-month WTI contract had rallied to $45 from around $43.50 on a spate of dollar softness and managed to remain up around $45 even though the devaluation. During the mid-European session, the contract broke down, dropping below yesterday's lows to $43.27, down 4%. This marks a fresh six-year low. OPEC production rose slightly in July, to 31.5 million bbls, the highest level since mid 2012. Brent is down 3%, trading below $49.20.
Shares of Google are up 4.3% but off their best levels after the firm announced a new holding company organizational structure. Basically, the company breaks its financial performance into two baskets: Google (with its lucrative search and ads business, YouTube and Android) and the various other ventures grouped under Alphabet, including Nest home automation, Google Fiber, Google X, Calico and Google Capital.
***Looking Ahead***
- (RU) Russia Jun Trade Balance: $14.0Be v $15.3B prior; Exports: $30.3Be v $30.9B; Imports: $16.4Be v $15.6B prior
- 12:00 (US) DOE Short-Term Crude Outlook
- 13:00 (US) Treasury to sell $24B in 3-Year Notes
- 15:00 (MX) Mexico July ANTAD Same-Store Sales Y/Y: 5.8%e v 5.0% prior
- 16:30 (US) Weekly API Oil Inventories
- 19:00 (KR) South Korea July Unemployment Rate: 3.8%e v 3.9% prior
- 19:50 (JP) BOJ Minutes for July 14-15 Meeting
- 19:50 (JP) Japan July PPI M/M: -0.1%e v -0.2% prior; Y/Y: -2.9%e v -2.4% prior
- 23:00 (CN) China to sell 5-Year Bonds
***Economic Data***
- (IL) Israel July Trade Balance: -$0.9B v -$1.0B prior
- (US) July NFIB Small Business Optimism: 95.4 v 95.4e
- (ZA) South Africa Jun Manufacturing Production M/M: 0.9% v 0.6%e; Y/Y: -0.4% v -0.9%e
- (BR) Brazil Aug IGP-M Inflation (1st Preview): 0.1% v 0.5%e
- (US) Goldman Economist Chain Store Sales w/e Aug 8th w/w: +0.2%; y/y: +3.1%
- (CA) Canada July Annualized Housing Starts: 193.0K v 195.0Ke
- (US) Q2 Preliminary Nonfarm Productivity: 1.3% v 1.6%e; Unit Labor Costs: 0.5% v 0.0%e
- (US) Weekly Redbook Sales w/e Aug 8th: +1.9% y/y, Aug MTD m/m: +0.5%;
- (EU) Weekly ECB Forex Reserves w/e Aug 7th: €262.8B v €261.9B w/w
- (MX) Mexico Jun Industrial Production M/M: 0.2% v 0.3%e; Y/Y: 1.4% v 1.1%e; Manufacturing Production Y/Y: 4.2% v 3.1%e
- (US) Jun Wholesale Inventories M/M: 0.9% v 0.3%e; Wholesale Trade Sales M/M: 0.1% v 0.5%e
[I]Contributed by Trade The News[/I]
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