Morning Call - January 6, 2016


March E-mini S&Ps (ESH16 -1.52%) are down -1.50% at a 2-1/2 month low and European stocks are down -1.38% at a 3-month low as global stocks sell-off after China weakened its currency and heightened concerns about an economic slowdown. The yuan plunged to a 4-3/4 year low against the dollar after the PBOC reduced its daily reference rate for the yuan for the seventh day in a row. This raises the risks that other nations may need to lower their exchange rates to remain competitive with China. Technology stocks are also moving lower, led by a 2.8% decline in Apple (AAPL) in pre-market trading, after the Nikkei Asian Review reported that Apple would reduce Q1 output of its latest iPhones by about 30%. Geopolitical concerns also weighed on equity markets after North Korea said it successfully tested a hydrogen bomb. Asian stocks settled mostly lower: Japan -0.99%, Hong Kong -0.98%, China +2.25%, Taiwan -1.05%, Australia -1.18%, Singapore -1.06%, South Korea -0.65%, India -0.68%. Japan's Nikkei Stock Index fell to a 2-1/2 month low, but China's Shanghai Composite closed higher on speculation that Chinese regulators will extend a ban on stock sales by major shareholders that is due to expire Friday.

The dollar index (DXY00 -0.06%) is down -0.05%. EUR/USD (^EURUSD) is unchanged. USD/JPY (^USDJPY) is down -0.60% at a 2-1/2 month low.

Mar T-note prices (ZNH16 +0.33%) are up +13.5 ticks at a 3-week high as the slide in global stocks boosts safe-haven demand for government debt.

The PBOC cut its daily reference rate on the yuan by 0.22 percent to 6.5314 per dollar, which sent the yuan falling to 6.5616 per dollar, a 4-3/4 year low.


Key U.S. news today includes: (1) weekly MBA mortgage applications (previous +7.3% with purchase sub-index +4.1% and refi sub-index +10.8%), (2) Dec ADP employment (expected +195,000, Nov +217,000), (3) Nov U.S. trade deficit (expected -$44.00 billion, Oct -$43.89 billion), (4) final-Dec Markit U.S. services PMI (expected +0.3 to 54.0, prelim-Dec -2.4 to 53.7), (5) Dec ISM non-manufacturing index (expected +0.1 to 56.0, Nov -3.2 to 55.9), (6) Nov factory orders (expected -0.2%, Oct +1.5% and +0.2% ex transportation), and (7) minutes of the Dec 15-16 FOMC meeting.

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Disclosure: None.

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