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The US is looking at its worst quarter in four years down 6.4%. The ASX is currently down 8.5% over the same period and having its worst quarter in four years.
Leads from the Street are thin this morning, so expect a pretty flat session. Hong Kong, Korea and Taiwan are all shut today for Mid-Autumn Festival, and China will have a week-long holiday for National Day from Thursday.
Here’s what’s catching my attention:
For the first time in 25 years, cash has lead all other asset class. US$17 billion was added into money markets last week compared to US$3.3 billion being pulled from equities and a miniscule $400 million added to bonds. This is the first time since 1990 that this has happened – a big risk off indicator.
The AUD has been swinging. Having been the best performing currency for the previous two weeks, it went to the bottom of the ladder last week, falling 2.36% on China risk. Interestingly, the GBP was the second worst performer, however, over the weekend several currency analysts have built bull-cases for the Bank of England (BoE) to raise rates, making the GBP one to watch.
Dr Copper needs a doctor. Cu++ ended last week on a very sluggish note at US$5042 a tonne on the London Metal Exchange (LME) – tumbling 4.4% for the week. It is now down 12.95% for the quarter as the China story finds more questions than answers and it’s the worst performing industrial metal in Q3.
The December Fed funds rate futures heading into Yellen’s speech on Friday was forecasting a 41% expectation of a hike. After she told the world that she’s a December-hiker, the futures recovered to 49%; over the weekend it has returned to 42% as six Federal Open Market Committee (FOMC) members are due to speak this week. The one to watch is Bill Dudley, who is speaking on monetary policy tonight. Will he clarify his position on the dot-plots? Most believe he is one of the three members to shift expectations out to 2016.
China’s manufacturing will remain in focus all week, Thursday sees the official PMI, and 45 minutes later we’ll get the final Caixin PMI numbers. The horror flash release last week have left most pondering if China will have to ramp up its transition to a consumption economy even faster after this statement:
‘The decline indicates the nation’s manufacturing industry has reached a crucial stage in the structural transformation process.’
Asia and Emerging Markets (EMs) have underperformed Developed Markets for a third consecutive week. As a group, EMs and Asia lost 5% and the most notable declines were Indonesia, Taiwan and offshore Chinese entities.
Slight bright spot, Australia’s earnings per share (EPS) was revised higher (if only just, and coming from a low base) as the non-mining space continues to chug along in second gear and housing remains relatively positive.
Australian housing after ‘Super Saturday’ will be interesting as macro-prudential continue to drag investor loans. Australian housing is likely to see a plateau phase through to Christmas.
Ahead of the Australian open, we’re currently calling ASX down a handful of points to 5037.