Margin Call
Good Morning! Global Futures are under pressure as Greek talks collapse over the weekend, and MERS infections spike, causing angst in Asia. European markets are sharply lower, led by a 5% drop in Athens as most Greek banks lose 10%+. Germany's DAX is off 1.5%, well outpacing the S&P's 30bp decline - as Financials fall 2% (Greece) and Consumer Discretionary off 1.5% (Talk increased Russian Sanctions). Despite the pullback, Volumes remain quite light - with most exchanges trading 30% below recent levels. Over in Asia, the Nikkei was quiet, but China dropped 2% (Talk insider sales accelerating) - while Korea lost 50bp as MERS infections spike, causing travel restrictions and warnings. Hong Kong dropped 1.5%, while other EM markets were hit - with Indonesia off almost 2% - the Failure of TPP in Congress may be weighing in Asia.
Yields on Greece's two-year debt climbed 192 basis points to 27% as the Greece talks implode last night - Thurs Eurogroup looking like a Cyprus "take it or leave it" moment. Safety buying sees both the US and German 10YY lower slightly, but Rate-Lock Selling is beginning in Treasuries as multiple deals hit the tape. The DXY is higher, gaining against Euro (watch 1.12 - Euro-Dollar Volatility the highest in 3+years this AM), Yen and Aussie$. The stronger $ is a headwind to commodities, and we have the Oil complex dropping driven by a 2% drop in Brent early (Sanctions Fears?). Gold hates a stronger $, and Copper is retreating fast, losing 2%. All the softs are in the red, led by a 1% drop in the Wheat Complex. We have an active day of catalysts, starting with Empire Manufacturing at 8:30 - then ECB President Mario Draghi Speaks at 9. We get US Industrial Production at 9:15, then the ECB Publishes Weekly QE Details at 9:45. The NAHB Housing Market Index is at 10, and ECB's Coene Speaks at Noon.