Sep 6, 2018, by Lorcan Roche Kelly
Bear with us
The MSCI Emerging Markets Index retreated for a seventh day, bringing its drop since a peak in January to near 20 percent. Should it reach that level at the New York close, it will place the gauge in a bear market. JPMorgan Chase & Co. and BlackRock Inc. warned that a herd mentality has taken over, as assets from Brazil to Indonesia are caught in the sell-off. European companies with significant exposures to the region are getting hit too. The correlation between the MSCI gauge for European and developing-economy stocks has risen to the highest in almost seven months.
Bitcoin has dropped more than $1,000 over the last two days to trade at $6,367.30 by 5:45 a.m. Eastern Time, while the Bloomberg Galaxy Crypto Index hit its lowest level since November 2017. The sell-off which began yesterday came after a report said that Goldman Sachs Group Inc. is pulling back on near-term plans to set up a digital currency trading desk. The market may also be suffering from no longer being the hottest investment around, a crown which seems to have passed to pot stocks.
Today is the deadline for public input on tariffs targeting $200 billion of Chinese goods, with President Donald Trump expected to act on the measures soon after the deadline passes. With the president on the campaign trail, hitting China with more tariffs may appeal to his base ahead of an election that could see Republicans lose control of the House. Elsewhere on trade, Trump talked up the chances of reaching an agreement with Canada on a new Nafta, saying there may be progress in a few days.
Overnight, the MSCI Asia Pacific Index fell 0.6 percent while Japan’s Topix index closed 0.7 percent lower as a strong earthquake added to economic risks already heightened by this week’s typhoon and the threat of a global trade war. In Europe, the Stoxx 600 Index was 0.1 percent higher at 5:45 a.m., as the gauge bounced back from a weak start to the session in mixed trading. S&P 500 futures pointed to a slightly higher open, the 10-year Treasury yield was at 2.895 percent and gold rose above $1,200 an ounce.
It’s a busy day on the U.S. economic calendar ahead of tomorrow’s payrolls numbers. At 8:15 a.m., we get ADP’s August employment change, with weekly jobless claims due at 8:30 a.m. At 9:45 a.m., Markit publishes services and composite PMI numbers, with the ISM non-manufacturing index at 10:00 a.m. July factory and durable goods orders are also out at 10:00. The EIA U.S. crude inventory report comes at 11:00 a.m.