Return of Chinese Equity Slide Dampens Global Markets

Economic data

- (PT) Portugal July PPI M/M: -0.4% v -0.2% prior; Y/Y: -2.5% v -1.9% prior
- (IL) Israel Jun Manufacturing Production M/M: 3.7% v -1.1% prior
- (TR) Turkey Central Bank (CBRT) left its Key Rates unchanged, as expected 
- (BR) Brazil Aug IGP-M Inflation (2nd Preview): 0.2% v 0.2%e 
- (CL) Chile Q2 GDP Q/Q: 0.0% v -0.1%e; Y/Y: 1.9% v 1.7%e 
- (CL) Chile Q2 Current Account Balance: $0.8B v $0.9Be 
- (US) Goldman Economist Chain Store Sales w/e Aug 15th w/w: -1.9%; y/y: +2.6%
- (PL) Poland July Average Gross Wages M/M: 1.4% v 1.3%e; Y/Y: 3.3% v v 3.4%e 
- (PL) Poland July Employment M/M: 0.1% v 0.0%e; Y/Y: 0.9% v 0.9%e 
- (US) July Housing Starts: 1.206M v 1.180Me; Building Permits: 1.119M v 1.228Me 
- (US) Weekly Redbook Sales w/e Aug 15th: +1.6% y/y, Aug MTD m/m: +0.3%; Aug MTD y/y: +1.7%
- (RU) Russia July PPI M/M: 1.5% v 1.0%e; Y/Y: 13.1% v 12.8%e 

The yuan may have stabilized for the moment but huge Chinese equity declines are back. The Shanghai Composite saw its biggest slide since late July, dropping 6.2%, and the PBoC responded by making very large liquidity injections. European equities were under pressure for most of the session and US stocks have struggled to stay out of the red. As of writing, the DJIA is flat, the S&P500 is down 0.06% and the Nasdaq is down 0.25%. 

US housing starts rose to a total of 1.21M units in July, an eight-year high, up from the revised 1.20M unit figure for June. The 782K total for single family starts was the highest print since December 2007, while multifamily starts actually declined by double-digits from June. Building permits declined nearly 17% from the June report, however analysts highlight the prior three months of reports have disclosed very strong increases. Shares of homebuilder Hovnanian are up 17% this morning, while other major homebuilders are up 2-3% a piece. 

Shares of Walmart of down 3% this morning after the retail giant missed on earnings and cut its full-year outlook. Walmart blamed higher costs and margins pressure for its disappointing earnings performance, citing higher wages and lower profitability in the US pharmacy business. In other earnings, shares of Home Depot are up 3.3% in the early going after the company met expectations and raised its FY view for the second time this year. Profits and revenue both gained by a modest amount on a y/y basis. Discount apparel retailer TJX Companies also beat expectations and raised its FY guidance, and disclosed sales comps +6%, double the expected gain. The firm noted the current quarter is off to a strong start. TJX is up approximately 6%.

The resumption of Chinese equity declines is not helping the commodities complex. Crude prices are hovering around the six-year lows seen over the last two sessions, with WTI trading around $42.20 and Brent around $48.50 currently. The dollar has pushed out to its strongest level against the euro in a week, as EUR/USD extended the downtrend seen over recent sessions. After peaking at 1.1215 last Wednesday, EUR/USD has been testing 1.1020 this morning. LME copper futures fell below $5,000, marking their lowest level since 2009.

Looking Ahead

 
- 15:00 (AR) Argentina Q2 Unemployment Rate: 7.2%e v 7.1% prior
- 16:30 (US) Weekly API Oil Inventories
- 17:00 (KR) South Korea July PPI Y/Y: No est v -3.6% prior
- 18:45 (NZ) New Zealand Q2 PPI Input Q/Q: No est v -1.1% prior; PPI Output Q/Q: No est v -0.9% prior
- 19:50 (JP) Japan July Trade Balance: -¥53.0Be v -¥69.0B prior; Adj Trade Balance: -¥158.6Be v -¥251.7B prior; Exports Y/Y: 5.9%e v 9.5% prior; Imports Y/Y: -7.6%e v -2.9% prior
- 23:00 (CN) China to sell 7-Year Bonds
- 23:00 (TH) Thailand to sell THB20B in 2020 Bonds