From Marc to Market:
Overview: Investors' mood did not improve over the weekend, and the lack of risk appetites are rippling through the capital markets today. Equities have tumbled, yields have backed off, and the dollar is well bid. Hong Kong and Australia led the sell-off in the Asia Pacific region, off 3.3% and 2.1%, respectively. Regional losses may have been larger, but Japan, Chinese (mainland), and South Korea markets were on holiday. Europe's Dow Jones Stoxx 600 is off 2%, the most in two months. US futures are pointing to opening losses of 1%+. The carnage is giving the bonds markets a bid. The US 10-year yield is off a couple of basis points, around 1.33%. Europe's benchmarks are mostly 1-2 bp lower. The dollar is extending last week's gains against nearly all the major and emerging market currencies. The yen and the Swiss franc, the other funding currencies, are also firm. The Australian dollar and Scandies are the weakest of the majors, while the Russian ruble holds the dubious distinction among emerging market currencies. The JP Morgan Emerging Market Currency Index is moving lower for the third consecutive session. Gold is not drawing as much support as one might expect from the softer yields and falling equities. It is a little firmer near midday in Europe. Oil's recent gains are being pared, and the November WTI is off 2.2%, its second day of losses, and is approaching $70. Iron ore has continued to fall, and after falling 4.5% last week, copper is off another 2.6% today.
Asia Pacific
The seemingly slow demise of China's Evergrande is weighing on sentiment. However, most of the contagion seems limited to the real estate development sector. Sinic, another property developer, collapsed more than 85% today before trading halted. The next key event in the saga may be an Evergrande interest payment due Thursday on two notes, one of which is trading at 30% of face value.
A top Chinese regulator defended Beijing's actions to a group of Wall Street executives and tried playing down the worrisome implications. First, regulations were strengthened for companies with consumer-facing platforms. Second, data privacy was improved. Third, there were national security gaps that were closed. Fourth, "social anxiety" over education and gaming was addressed. Many investors are unlikely to be persuaded. Even if the one is sympathetic to the ends, the means still rankle investors. It still appears to be the aggrandizement of the state sector and choking the private sector. No rival authority (family, cultural expressions, business) to the CCP is brooked.
This week's BOJ meeting is not drawing much attention. The domestic focus is on next week's LDP leadership contest, where Kono is the favorite and a substantial fiscal policy. The yen is being supported by the risk-off mood. After being rebuffed a little above JPY110, the dollar is trading near JPY109.60. A band of support extends to around JPY109.45, but the key is closer to JPY109.00, where an option for nearly $1.1 bln rolls off today. Falling iron ore prices and weaker miners in Australia saw the stock market tumble to three-month lows today, and the Australian dollar's two-week drop is being extended. It fell to nearly $0.7225 today. A week ago, it was about a cent and a half higher. The next downside target is around $0.7200, and a break could spur a move to the year's low set in late August near $0.7100. With Chinese mainland markets closed, the yuan did not trade onshore. The offshore yuan fell for the third consecutive session, and around CNH6.4835, the greenback is near a three-week high.
Europe....
....MUCH MORE
