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12Aug2015 Pre-Market Commentary: U.S. Futures Sharply Lower, U.S. Dollar Slipping, Chinese Yaun Devalues Further, World Stocks Fall, Global Oil Glut To Continue

Written by Gary

U.S. stock futures index's were sharply down this morning after China's yuan fell sharply for a second day. China set today's yuan daily midpoint reference even weaker than Tuesday's devaluation, pushing the currency down 4% over the last two days.

The U.S. dollar is slipping again fractionally and WTI oil is testing its new resistance.

Markets are expected to open lower with the prospects of improving by mid morning, perhaps even seeing some green.


Here is the current market situation from CNN Money

European markets are sharply lower today with shares in France off the most. The CAC 40 is down 2.74% while Germany's DAX is off 2.35% and London's FTSE 100 is lower by 1.06%.

World stocks, Asian currencies, commodities and government bond yields triggering concerns over the country's economic health and analysts say the global oil glut will last through next year as surging demand and faltering supply growth fail to clear the surplus.

What Is Moving the Markets

Here are the headlines moving the markets.

Global stock market sell-off intensifies as China's currency weakens further

TOKYO (AP) — Global stocks sank Wednesday as China let its currency fall for a second day following a surprise devaluation that rattled global financial markets. China's government said the devaluation of the yuan was part of reforms meant to make its exchange rate more market-oriented.

But the decision has added to worries over slowing growth in the world's second-largest economy and that Western companies might find it harder to sell their goods there.

KEEPING SCORE: The Chinese yuan's market rate fell 1.8 percent after Tuesday's nearly 2 percent decline, which was the biggest drop in a decade. Germany's DAX dropped 2.4 percent to 11,025.72 and Britain's FTSE 100 lost 1.2 percent to 6,588.08. France's CAC 40 shed 2.2 percent to 4,985.63. Wall Street looked poised for further losses, with both Dow and S&P futures down 0.9 percent.

China central bank under pressure to weaken yuan further

BEIJING (Reuters) - China's move to devalue its currency reflects a growing clamor within government circles for a weaker yuan to help struggling exporters, ensuring the central bank remains under pressure to drag it down further in the months ahead, sources said.

Macy's reports fall in sales, forms e-commerce JV in China

(Reuters) - Macy's Inc reported a 2.6 percent fall in quarterly sales, the fourth drop in six quarters, as spending by foreign tourists declined "significantly" due to a strong dollar.

Oil Majors' Downstream Outlook Lacks Refinement

Refining businesses have softened the blow from lower oil prices so far this year. But exceptionally high refining margins are unlikely to last.

Exclusive: Greek bank bailout funds depend on business plan, stress test

FRANKFURT/BRUSSELS (Reuters) - Initial bailout funds for Greek banks will be placed in a special account not on their balance sheets and lenders will receive fresh equity only after a "stress test" is finished by the end of October, several sources told Reuters on Wednesday.

Yuantervention: PBOC Devalues The Yuan, Then Scramble To Support It In The Open Market

As we noted earlier, the most surprising development out of this mornings repeat rout in the Chinese currency was not that it happened: after all as we laid yesterday out there is at least 10-15% in immediate downside left for the Yuan...

... but that shortly before the market close, China's central bank intervened via "at least one major Chinese state-owned bank sold large amount of dollar shortly before market closed, prompting rapid gain in yuan, according to two traders at onshore banks" Bloomberg reported adding that at least one state bank continuously sold dollar until USD/CNY reached around 6.38.

We bring this up because while we noted it when it happened just after 3am local time...

Yuantervention

â€" zerohedge (@zerohedge) August 12, 2015

...it is now being observed by the mass medias such as the WSJ

Alibaba's Suning deal a riposte to growing might of rival JD.com

BEIJING (Reuters) - "Tragedy" â€" that was Alibaba Group Holding Ltd founder Jack Ma's prediction for the fate of rival JD.com Inc in comments published earlier this year.

Fidelity National to buy software maker SunGard in $9.1 billion deal

(Reuters) - Payment services provider Fidelity National Information Services Inc said it would buy privately held financial software maker SunGard Data Systems Inc for $9.1 billion, including debt.

Alibaba growth slowest in three years

BEIJING (Reuters) - Alibaba Group Holding Ltd's revenue for the three months ended June rose 28 percent, missing analysts' estimates, with growth slowing to its lowest rate in more than three years.

Futures slump as China devalues yuan further

(Reuters) - U.S. stock index futures fell sharply for a second day in a row on Wednesday as China pushed the yuan lower again, exacerbating fears about a global economic slowdown.

Do Asset Purchase Programs Push Capital Abroad?

by Liberty Street Economics

-- this post authored by Thomas Klitgaard and David Lucca

Euro area sovereign bond yields fell to record lows and the euro weakened after the European Central Bank (ECB) dramatically expanded its asset purchase program in early 2015. Some analysts predicted massive financial outflows spilling out of the euro area and affecting global markets as investors sought higher yields abroad. These arguments ignore balance of payments accounting, which requires any financial outflow from the euro area to be matched by a similar-sized inflow, absent a quick and substantial current account improvement. The focus on cross-border financial flows also is misguided since, according to asset pricing principles, the euro and global asset prices can move without any change in financial outflows.

Frontrunning: August 12


China central bank under pressure to weaken yuan further (Reuters)

Currency Rout Goes Global as Jen Sees Risk of 50% Loss on China (BBG)

Europe Stocks Fall Most in Two Weeks as China Sparks Growth Fear (BBG)

German Yields Drop to Record as China Boosts Bonds Around World (BBG)

FT to Japan, Economist to Italy: Agnelli Family Raises Stake in Economist as Pearson Exits (BBG)

Goldman Sachs to Give Out â€'Secret Sauce' on Trading (WSJ)

Greece's Preliminary Bailout Deal Faces German Turbulence (BBG)

Greece Wins Delay in Privatization Fund (WSJ)

Trump's female fans shrug off 'blood' comment about TV host (

Stocks, yields tumble after China pushes yuan lower again

LONDON (Reuters) - Markets around the world fell for a second day on Wednesday, with stocks, the dollar and emerging market currencies all under pressure after China pushed the yuan lower again overnight, boosting the appeal of top-rated government bonds.

Eurozone Industrial Production Falls

Industrial production across the eurozone declined more than expected in June, as output fell in the region's three largest economies, another sign that lackluster investment continues to restrain economic activity.

Ford targets emerging markets with frugal India build

NEW DELHI (Reuters) - Ford Motor Co plans to use low-cost engineering it learned in India to develop compact models for other emerging markets, executives said, emulating a strategy used by Asian rivals that outsell it in the world's fifth-largest auto market.

Is China's Growth Miracle Over?

by San Francisco Fed

-- this post authored by Zheng Liu

The recent slowdown in China's growth has caused concern about its long-term growth prospects. Evidence suggests that, before 2008, China's growth miracle was driven primarily by productivity improvement following economic policy reforms. Since 2008, however, growth has become more dependent on investment and overall growth has slowed. If the recent reform plans can successfully address the country's structural imbalances, China could maintain a solid growth rate that might help smooth its transition to high-income status.

Equity Futures Tumble Again, S&P To Open Under 200DMA, 10Y Yield Approaches 1-Handle

The overnight market has been a repeat of yesterday's action, when following China's repeat 1.6% devaluation of the CNY (which was to be expected since the PBOC made it quite clear the fixing would be based off the market value, a value which continues plunging), the second biggest in history following Monday's 1.9% plunge, traders appeared stunned having believed the PBOC's lies that the devaluation was a one-off and as a result the E-Mini tumbled overnight, and is now 30 points lower from last night's PBOC fixing announcement, trading at around 2058, and far below the "magical" 200-DMA support line, which has now been solidly breached.

Perhaps the only saving grace right now is that the PBOC stepped in the last minutes of trading to prop up the yuan, or else today's bloodbath, not just across Asian FX as shown earlier, but in US and European equity markets would have been far, far worse. For Asia, however, it was too late: all major indices were firmly in the red, with the Nikkei 225 (-1.6%), ASX 200 (-1.7%) and Hang Seng (-2.4%) and Shanghai Comp. (-1.1%) pressured, which followed in tandem with US equity futures as the actions by the PBoC further added uncertainty and concerns of weak underlying Chinese growth. At the same time, JGBs gained 29 ticks amid a risk off tone.

But what was bad for stocks was delightful news for Treasurys, whose yields tumbled overnight, and at last check were trading just modestly off the overnight lows of 2.07%. We fully expect a 1-handle in the 10 Year within days. As RanSquawk notes, the latest move by the PBOC caused an uproar across various asset classes, with USTs now up over 1.5 points since Monday and stocks in Europe trading lower over 2% this morning amid fears of negative spill over effects. As a result, US inflation swap forward 5Y5Y rate now trades at the lowest sin ...

China lets yuan fall further, fuels fears of currency war

SHANGHAI (Reuters) - China's yuan hit a four-year low on Wednesday, falling for a second day after authorities devalued it, and sources said clamor in government circles to help struggling exporters would put pressure on the central bank to let it fall lower still.

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To contact me with questions, comments or constructive criticism is always encouraged and appreciated:

gary@econintersect.com

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