10 things you need to know before the opening bell
US markets are roaring back with a vengeance. Dow futures are up 300 points, S&P 500 futures are up 37 points, and Nasdaq futures are up 79 points. This makes up for all of what the markets lost on Friday. Markets in Europe are broadly in the green with Britain's FTSE 100 up 1.8%, Germany's DAX up 2.3%, France's CAC 40 up 1.9%, and Spain's IBEX up 1.5%.
China's making moves reduce the wild swings in its stock market. China said on Monday it would remove personal income tax on dividends for shareholders who hold stocks for more than a year in a move aimed at encouraging longer-term investment in equities as opposed to short-term speculation. And according to the state-run news agency Xinhua, Chinese stock exchanges have began soliciting public opinion on an index circuit breaker system, which would suspend trading temporarily in response to substantial movements in the nation's stock markets. The draft proposes that whenever an index gains or falls by five per cent during the session, trade would automatically cease for 30 minutes. China's Shanghai Composite surge 2.9% on Tuesday.
Chinese trade tanks. Chinese exports tumbled 6.1% in August, while imports plunged 14.3%. The country's trade surplus ballooned to $60.236 billion from $3.03 billion in July. This is the second highest trade surplus on record. Btw, China's 2014 was worse than they thought. On Monday, China's National Bureau of Statistics revised its 2014 economic growth rate to 7.3% from 7.4%.
China is burning through cash. China's currency reserves fell by a record $93.9 billion in August to $3.557 trillion as the country struggles to prop up its weak currency. The People's Bank of China is selling dollars and buying yuan, which has been suffering since China devalued it against the dollar. "The fear is that today's data will reinforce the market view that the only way for the yuan to go is down, and further accelerate capital outflows," Bloomberg's Tom Orlik said.
Japan's Q2 contraction wasn't as bad as they initially thought. GDP contracted by 0.3% in the three months ending in June, which was a bit better than the 0.4% decline estimated a month ago. The upward revision left the seasonally-adjusted annual rate at -1.2%, smaller than the -1.6% preliminary estimate and expectations for a contraction of 1.8%.
Europe's Q2 was also a little better than expected. Eurozone GDP climbed by 0.4% in the three months ending in June, which was a bit better than the 0.3% growth estimated a month ago. "In one line: Surprisingly strong," Pantheon Macroeconomics' Claus Vistesen said. "The upbeat revision of GDP growth is a positive surprise, but also consistent with survey data and real M1 growth pointing to an underlying trend in real GDP growth of about 1.5%-to-2.0%."
The G20 wants a truce on currency wars. Finance ministers and central bankers from the 20 largest economies met in Turkey this past weekend. Among other things, they addressed the concern that the world's monetary authorities would increasingly move to devalue their currencies following China's surprise yuan devaluation. From the G20's communique: "We reiterate our commitment to move toward more market-determined exchange rate systems and exchange rate flexibility to reflect underlying fundamentals, and avoid persistent exchange rate misalignments. We will refrain from competitive devaluations, and resist all forms of protectionism."
At the G20, China was all about talking stability. Everyone was particularly interested to hear what China's representatives had to say amid slowing growth, a weakening currency and a crashing stock market. Finance Minister Lou Jiwei acknowledged China's growth woes and said central government spending would rise 10% this year, more than the 7% budgeted at the start of the year, Reuters reported. People's Bank of China Governor Zhou Xiachuan said that the rout in the stock market was near its end, noting that leveraged had declined and that the real economy went relatively unscathed. Zhou expressed confidence that the yuan-US dollar exchange rate had stabilized.
US small businesses are optimistic. The NFIB's Small Business Optimism index improved to 95.9 in August from 95.4 in July. However, the NFIB notes that the surveys for this report were conducted before volatility spiked in the global financial markets.
The economic calendar is light today and all week. At 3;00 p.m. ET, we'll get the July consumer credit balances report from the Fed. Economists estimate consumer credit balances increased by $18.6 billion in July. Read the full preview in Business Insider's Monday Scouting Report.