Emerging Market Mayhem Morphs

The Turkish lira continued to rebound Wednesday as the 6.00 level gave way but the South African rand led a slide in other emerging market currencies as the US dollar climbed and commodity prices sank. Japanese trade balance and Australian employment are due up next. The Premium trade shorting DAX30 was closed for 300-pt gain at 12120. A trading note was issued, indicating the next course of action.

Poor earnings at Chinese giant Tencent set off a wave of worries about emerging markets even as Turkey's currency was lifted by a timely $15 billion direct investment from ally Qatar.

Argentina's central bank sold more than $1 billion set of a fresh round of jitters about emerging markets. Chinese markets fell 2% and other markets were battered. The trouble led to a flight to the yen and a bruising day for commodities that saw copper down 4%, crude oil down 3.2% and gold down another $20 to $1174. The S&P 500 fell 21 points.

Today's US data releases were robust. EM moves overshadowed some top-tier US economic data. US July retail sales rose 0.5% compared to 0.1% expected. The headline showed surprisingly robust vehicle and parts sales despite a poor month for automakers but that was balanced by some other quirks that placed the control group at expectations. The Empire Fed was strong at 25.6 compared to 20.0 expected in another positive sign of the US but industrial production was a tad soft at +0.1% versus the +0.3% consensus.

The news will continue at a fast pace in the day ahead starting with the 2350 GMT release of Japanese trade balance for July. Exports are forecast up 6.3% y/y and imports up 14.2%, leading to a rare deficit at 41B yen.

The highlight of the Asia-Pacific day comes at 0130 GMT when July Australian unemployment numbers are due. The consensus is for no change to the 5.4% unemployment rate as the economy adds 15.0K jobs.