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Good Morning! China whacking us this AM, with US Futures off almost 2%. Shanghai closed early after 7% drop. Blamed on: Lighter PMI data, China's renminbi hitting a 4Y low, New IPO rules, and selling in anticipation of China Short Sales Ban on 5% holders to be lifted Friday. Full on bloodbath in Europe, with the DAX off 4% in very heavy turnover as it plays catch-up with the late sell-off last week - every major sector in Frankfurt was at least 4% lower - losses are led by the basic resources and autos, both heavily exposed to Chinese demand. Miners are crushing the FTSE with Anglo off 7% and Glencore 5%+, hitting London for 2.4%. Over in Asia it was a sea of red with China's 7% hit setting the tone, where only 17 stocks rose on the Shanghai exchange as the new "circuit Breaker" rules in effect today seemed to fuel the anxiety as markets got very sloppy after an initial halt to trading. Japan closed off 3% as the $/Y breaks downside 120 for first time since Oct on Abe comments - India was hit for 2% as PMI disappointed there, while every Emerging Market was hit for at least 1%+.
There is a sharp haven bid as one would expect, pushing the US 10YY off 5bp back towards the 2.2% level and under the 50dma. This follows a sharp bid for Bunds, which sees the German benchmark yielding only 56bp. With leverage coming off, the Carry Currencies are all seeing a bid, led by Yen and Euro as we enter Jobs week here in the States. While a weaker $ is a tailwind for commodities, Industrial metals like Copper and Zinc are off 2.5%+ on Chinese angst - while a Safe haven bid and headlines of Indian inflation has precious metals higher - Gold advancing 1.1%. Heightened tension in the Middle East has a bid under Crude, but honestly one would have expected more than a 50bp pop in WTI on the Saudi-Iran / Libya headlines. Natty gas is reversing some of last week's surge, dropping 1.4% despite forecasts of very cold temperatures and winter storms over the next few weeks.
Scheduled Catalysts today include Markit US Manufacturing PMI at 9:45 right when the ECB Publishes Weekly QE Details. At 10am we get Construction Spending and ISM Manufacturing, followed by a Gallup survey on US Consumer Spending at 2pm. 3:30 brings us CFTC weekly trader commitments report (Delayed from Jan1), while Fed's Williams Speaks tonight after the close at 5:30. Down in Washington, at 2:10 President Obama meets with Attorney General Loretta Lynch, FBI Director James Comey and ATF Deputy Director Thomas Brandon to discuss what executive actions he can take to curb gun violence. Headlines should begin fast and furious from Las Vegas later today, where the consumer Electronics show is kicking off.