U.S. equity futures markets are called sharply lower this morning following a sell-off in Asian markets caused by trader aversion to risk and a Japanese GDP report which showed less growth than estimated.

 

The Chinese market led the sell-off as investors fled stocks for the safety of lower-yielding currencies such as the U.S. Dollar and Japanese Yen.  The Japanese Yen is actually up versus the Dollar as investors repatriate funds removed from U.S. equity markets.  Investment firms that borrowed Yen to fund the stock rally are now liquidating their equity positions and buying Yen to payback their loans.

 

The U.S. Dollar is up against all major currency markets except the Japanese Yen.  Trader aversion to risk is triggering a sell-off in the Euro and British Pound.  A report out of the U.K. that homeowners lowered their asking prices is putting additional pressure on the British Pound.

 

The stronger Dollar is pressuring December Gold and December Silver. Speculation that weakness in the Chinese economy will trigger less demand for December Copper is also leading to a call for lower prices on the opening.

 

Traders are pressuring September Crude Oil this morning on concerns that U.S. consumer spending will continue to weaken if unemployment remains high.  Traders are anticipating demand for gasoline to fall.  Less demand for higher risk assets is also leading traders to sell energy products this morning.

 

The weakness in the equity markets is triggering a flight to safety rally in the September Bonds and September Notes.  Traders also have been buying Treasuries over the past week because of the attractive yields.  Last week’s rally in the Treasuries during the auction was also an indication that demand is still there despite the growing deficit and the weaker Dollar this year.

 

Look for the stronger Dollar to put pressure on the Grains and Softs complexes as traders speculate that foreign demand will drop.  November Orange Juice may trade higher if there is evidence that the hurricane hitting Florida will adversely affect the orange juice crop.