Stocks looking ugly, Aussie pressured

Quick Recap

Stock markets were under pressure again last night after the weak lead from Shanghai shook traders’ faith in stocks. The 8.48% fall in the Shanghai Composite was the largest since 2007 and one of the biggest on record. That set the scene for a bad day in Asia, a very weak tone in Europe and weakness in US stocks.

On other markets, the US dollar lost ground against the euro, yen and pound but the Aussie dollar remains under pressure given the risk-off tone and continued weakness in commodities. Crude was down again, gold dipped back and Dr Copper was also lower. Unsurprisingly, amidst the carnage on stocks and commodity markets, bonds rallied.

I’m quoting myself from Business Insider this morning because I took longer than planned writing my Aussie dollar piece. It’s clear there is a perfect storm brewing. It’s a question of how low it goes. regular readers know i think its mid to low 60’s eventually.

On China: It’s all about China this morning as traders wonder what the next step in this dance between regulators and market forces will be. Westpac’s New Zealand based strategist Imre Speizer said that after the massive fall yesterday the “China Securities Regulatory Commission later said it would intervene”. The impact of the announcement overnight pushed bonds a bit higher but exactly what extra measures the CSRC can take, given all that has gone before and the massive line of credit that brokers and banks have to support the market, is difficult to fathom. But there is more than financial stability at stake here, there is the pride of not only the CSRC but also the Chinese Communist Party. The battle rages and genuine sellers’ exit positions – due to margin calls or fear of more loses – are hard to defeat unless all selling is banned from the government/agency stands in the market.

The overnight scoreboard (9.16am AEST):

• Dow Jones down 0.73% to 17,440
• Nasdaq down 0.96% to 5,038
• S&P 500 down 0.58% to 2,067
• London (FTSE 100) down 1.13% to 6,505
• Frankfurt (DAX) down 2.56% to 11,056
• Tokyo (Nikkei) down 0.95% to 20,350
• Shanghai (composite) down 8.48% to 3,725
• Hong Kong (Hang Seng) down 3.09% to 24,351
• ASX Futures overnight (SPI September) -43 to 5,491. That’s still higher than Saturday’s close :S
• AUDUSD: 0.7275
• EURUSD: 1.1086
• USDJPY: 123.27
• GBPUSD: 1.5557
• USDCAD: 1.3034
• Crude: $47.05
• Gold: $1,094
• Dalian Iron Ore (September): 388

On the day

On the data front today, there is nothing out in Australia. Tonight we get the German Ifo business index and the big one for the 24 hours to come is US durable goods orders.

CHART OF THE DAY: EURO

Higher within the box but breaking short term down trend.

SPX Weekly – watch this one

This chart is from my Weekly diary of all the key data and events for the next 7 days I write at Business Insider.

This is the simplest indicator I use for long term trends and its still bullish but it looks like its topping. Long term though and key here is its STILL bullilsh.