Opening Bell: Flight To Safety Boosts Yen, Swissy, Gold; Copper Climbs


  • European shares, futures seesaw after Asian, US selloffs

  • EM turmoil prompts rotation out of dollar and into yen, Swiss franc and gold

  • Hong Kong stocks bear brunt of Chinese selling on HKD risk; ASX underperforms

Key Events

Equities in Europe along with futures on the , and wavered this morning, after Asian traders remained broadly risk-off, pricing in expectations of weaker growth due to the ongoing emerging markets rout. The flight to safety in the early global open boosted US Treasurys and safe haven currencies.

The region-wide slipped 0.27 percent lower at the open, dragged down by miners shares. However, it later pared losses, trading in green territory by late morning, to then lose steam again and slide into the red. The benchmark has rebounded from a 3 percent selloff over the last six sessions.

Earlier, during the Asian session, the edged lower for the sixth consecutive day, losing 1.52 percent. China’s dropped 0.47 percent, for an aggregated 3.21 percent over the last eight sessions, since mainland shares started being sold off two days earlier.

The underperformed its mainland counterpart, falling 0.99 percent. China’s traders have cashed out on firms listed in Hong Kong on concerns around the as well as China’s overall economic weakness since the start of the trade war with the US.

S&P/ASX 200 Daily Chart

S&P/ASX 200 Daily Chart

Ironically, Australia’s lagged its regional peers, posting a 1.12 percent loss, for a 3.02 percent tumble over the last six sessions. The selloff was prompted by the potential of another $200 billion in US tariffs on Chinese goods. The reason it affected Australia’s shares even more than Chinese stocks is that the country’s economy is reliant upon exporting its resources, with China as its largest single buyer. Therefore, a slowdown in the Chinese economy also reduces the outlook for Australia’s economic growth.

Technically, the recent selloff pushes prices below their uptrend line since early April.

Japan’s slid 0.74 percent lower, for a combined six straight-day 2.71 percent drop. Th index has still managed to outperform the Hang Seng despite typhoon Jebi and harsh weather conditions over the past two months.

Global Financial Affairs

During yesterday’s US session, losses in FAANG shares dragged down the broader market after executives from leading tech companies were grilled by regulators on Capitol Hill over the role of social media in Russia’s meddling with the US presidential election in 2016.

The tumbled 1.19 percent, the most in three weeks, led by price slumps in Twitter (NYSE:), Facebook (NASDAQ:) and Alphabet (NASDAQ:). The heightened regulatory pressure on tech shares added to fears of an emerging markets spillover, prompting investors to cut losses.

The retreated 0.28 percent, dragged down by (-1.3 percent) and stocks (-1.25 percent). (+1.4 percent) and (1.15 percent) outperformed as investors turned defensive.

The was the only major US index that closed in positive territory, while small caps listed on the underperformed, dropping 0.33 percent. Once again this demonstrates that it isn’t the trade war that has been driving markets in the latest rout, but rather the overall fear of EM-spurred global selloffs. In times of uncertainty, the stability of mega-cap companies, such as those listed on the Dow, attracts investors while small caps are considered risky.

DXY VS Gold, Yen and Swiss Franc Daily Chart

DXY VS Gold, Yen and Swiss Franc Daily Chart

In FX markets, the extended yesterday’s decline, in favor of the more traditional safe haven assets: the , the and .

The UK’s inched higher for a second day after considerable volatility sparked by protracted Brexit discussions. Technically, the current rally may be following the return-move of the GBP’s crossing above its downtrend line since April.

Bitcoin, and other alt-currencies plummeted after Goldman Sachs reportedly dropped its plans to open a cryptocurrency trading desk.

Bitcoin Daily Chart

Bitcoin Daily Chart

is down 4.55 percent today and almost 12.75 percent over the last two days, wiping out two weeks of gains. Technically, the slump happened after the price neared the 200 DMA (red), when it proceeded to fall back below the 50 DMA and 100 DMA.

Up Ahead

  • Canadian for July are released Thursday.

  • The public comment period for proposed U.S. duties on an additional $200 billion of Chinese imports expires on Thursday.

  • Canadian is released Friday.

  • Canadian for August is released on Friday.

  • The key monthly US for August is due on Friday.

Market Moves

Stocks

  • Canada’s closed down 0.25 percent Wednesday, hitting a new three-month low.

  • The Europe 600 fell 0.3 percent, the lowest level in five months.

  • Futures on the dipped 0.2 percent, reaching the lowest level in more than a week on its fifth consecutive decline.

  • The dropped 0.2 percent, hitting the lowest level in more than two weeks with its sixth consecutive decline.

  • The ticked 0.6 percent lower, reaching the lowest level in about 14 months on its seventh straight decline.

Currencies

  • The Canadian was up 0.01 percent against the U.S. greenback early Thursday, trading at 0.7590.

  • The Dollar index is flat after fluctuating between gains and losses of over 0.1 percent.

  • The dropped 0.1 percent to $1.1619.

  • The Japanese yen climbed 0.2 percent to 111.36 per dollar, the first advance in a week.

  • The fell 0.4 percent to 6.6271 per dollar.

  • slid 0.5 percent to 15.5037 per dollar, the weakest level in more than two years.

  • The slipped 0.1 percent to the lowest level in 16 months.

Bonds

  • Canada’s was down early Thursday at 2.236, a 0.22-percent decrease.

  • The yield on Treasuries fell less than one basis point to 2.90 percent.

  • Germany’s yield dropped less than one basis point to 0.38 percent.

  • Britain’s yield gained less than one basis point to 1.404 percent.

  • The spread of Italy’s bonds over Germany’s climbed 16 basis points.

Commodities

  • The gained less than 0.05 percent.

  • fell 0.2 percent to $68.57 a barrel, the lowest level in a week.

  • LME climbed 0.3 percent to $5,888.50 per metric ton.

  • Gold gained less than 0.05 percent to $1,197.32 an ounce.



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