Yesterday’s equity futures markets probably would have closed lower following a negative reaction to the consumer confidence number, but weak 2-year Treasury Note auction results released about noon central time reversed the intraday trend and triggered a late session rally.
Overnight equity futures markets are under pressure once again. The weakness began in the international markets which were hit by a 5% decline in China’s Shanghai Composite Index. This move put some pressure on Europe which spread to the U.S.
The weakness in the equity markets overnight has triggered a flight to safety response in the foreign currency markets with the Dollar showing strength. The September Euro has been under pressure since yesterday when technical traders triggered a closing price reversal top September British Pounds are also feeling downside pressure. The bearish fundamentals seem to have caught up with this market. Finally, the September Canadian Dollar looks the most vulnerable to the downside.
September Treasury Bonds and Treasury Notes are trading higher. It looks as if investors are taking a little protection ahead of today’s equity market opening because of the overnight weakness. The Treasury continues its auction today which may make the bonds and notes vulnerable about mid-session. At this time it looks as if safety is winning over supply concerns.
The fear of holding more risky assets is triggering weakness in the precious metals with both December Gold and September Silver trading lower. The weakness in the Chinese stock market may have the most bearish influence on September Copper which has been driven higher recently by increased demand from China.
Look for weakness in the equity markets to spillover to the energy complex. Not only do traders have to deal with an oil inventory report, but also with the possibility of a sharp break in the stock market.
